This morning, Brekford Corporation announced it was chosen by the City of Greenbelt, MD, for the purposes of initiating a speed enforcement program. Terms of the agreement are yet to be negotiated. This is on the heels of Monday’s announcement where the Company announced a speed enforcement contract with the City of Denton MD, for a total of up to five speed cameras.
Even though the details of the City of Greenbelt contract are yet to be determined, it confirms what we had observed during our recent Company visit and attendance at Brekford’s semi-annual Fleet Management Solutions Trade Show. There is a lot of potential “low hanging fruit” in the Company’s home market of Maryland and across the Eastern Seaboard.
Both the cities of Denton, and Greenbelt, respectively were previous clients of Brekford. The fact that the Company is a complete end-to-end traffic safety solutions provider gives it a significant competitive advantage, even over industry giants like ACS (currently owned by Xerox ($XRX).
In addition, in a publicly document available on the township of Greenbelt’s website, the township lays out the specific reasons Brekford was selected over other competitors, including industry Giant ACS, including superior technology and back office systems:
Brekford’s small size is actually a major plus, even over ACS – the largest company in the auto traffic enforcement industry. Brekford provides services that are catered to individualized clients, and because it is flexible, it can innovate a lot quicker – as opposed to ACS’s one size fits all, mass-produce product approach.
The fact that Brekford, a small upstart, is able to take away business from the largest Company in the auto traffic industry bodes well for BFDI shareholders, and indicates that current analyst guidance may be way too low. Robert Wasserman, Analyst at Dawson James Securities, currently maintains a buy recommendation on BFDI shares and is forecasting $.06 EPS in fiscal year 2012. In addition, Dawson projects that the Company will have a total of 47 speed cameras and 12 red light cameras, up from 18 and 2 respectively.
Already this year, the Company has announced three contracts in the speed area and one in red light. So it appears there is a distinct possibility of the Company actually besting its projected number of camera systems in operations by the end of the year.
In summary, Brekford’s shares look attractive at current levels with the potential for upside surprises in revenue and earnings targets over the next few quarters. At the current levels, BFDI shares appear to be substantially undervalued, and are an attractive long-term pure play in the burgeoning automotive traffic enforcement industry: