GD Joins Stratosat in $75M Contract

SATCOM Technologies, a unit of General Dynamics Corporation (GD - Analyst Report), will work on a $75 million contract in South Africa in collaboration with Stratosat Datacom ("Pty") Ltd. Per the contract, the partnership will supply 64 radio-telescope antennas, ancillary electronic components and support South Africa's MeerKAT radio telescope program.

The contract was competitively awarded and applies the South African National Treasury rules for government procurements. The partnership will perform at least 75% of the work to maximize the skill, and perform qualification testing, tooling design and almost all the manufacturing work.

The radio-telescope antennas, which have a 13.5-meter main reflector, will offer higher optical performance and reception sensitivity. Further, the specially configured device is used to evade radio interference from satellites and terrestrial transmitters while giving the astronomers an opportunity to investigate earliest galaxies as well as unfold hidden truths of science.

The MeerKAT telescope array will have a gap of up to eight kilometers between the two antennas. Moreover, the telescope will facilitate research in the areas of cosmic magnetism, galactic evolution, large-scale structure of the cosmos, dark matter and the nature of transient radio sources.

The first antenna will be installed in late 2013 with all the 64 antennas to be placed by the end of 2016.

MeerKAT is the precursor telescope to the Square Kilometer Array (“SKA”). MeerKAT comprises 25% of Phase I scope and will be the largest and most sensitive radio telescope in the southern hemisphere until the SKA gets completed in 2024.

SATCOM Technologies, unit of General Dynamics C4 Systems, has extensive experience in large radio telescope and telecommunications projects around the world. The company provides antennas and high performance control systems to the astronomy community that includes the Atacama Large Millimeter/submillimeter Array astronomical observatory in the Chilean Andes and in most of NASA's Deep Space Network.

Based in Falls Church, Virginia, General Dynamics engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation.

Looking forward, key drivers for the company’s growth include the improving business jet market, its stable business of U.S. military vehicles, an ongoing share repurchase program and strong cash flow generation. However, the company is largely tied to the U.S. defense budget, where the threat of budget cuts is looming large. Also, we have turned slightly cautious about the company’s steadily-dropping order backlog, and risks related to the execution of key projects.

The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Some of the company’s main competitors are Lockheed Martin Corporation (LMT - Analyst Report) and Huntington Ingalls Industries, Inc. (HII - Snapshot Report).