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VSA Capital Market Movers – Ethernity Networks

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Ethernity Networks#: Initiation of Coverage

5G a Significant Opportunity

Ethernity Networks (LON:ENET) develops technology for networking and security acceleration for 5G networks that is sold standalone or supplied fully programmed in a Field Programmable Gate Array (FPGA) semiconductor based SmartNIC (Smart Network Interface Card). Ethernity technology addresses 5G Cloud – Radio Access Network (C-RAN) infrastructure, from fibre optic connectivity to processing of user data traffic. Data traffic is growing dramatically across internet, corporate and mobile networks. Ethernitys SmartNIC technology frees up the servers in data centres and those of mobile network providers, from network traffic processing. This saves on the capital cost of server processors (CPUs) and accelerates data.

Relationships with leading Mobile Providers

5G network infrastructure is being rolled out fastest across China followed by the U.S. Ethernity, an Israel based technology company, has a direct relationship with three major Mobile Network Operators (MNOs) – China Mobile, China Telecom and China Unicom. Ethernity is seeing increased focus on building a 5G mobile network based on Network Function Virtualisation (NFV) which is opening up SmartNIC engagement opportunities not just in China but also the U.S.

Market Validation for the Technology

Ethernity technology is gaining credible external verification. In February 2020, Ethernity, as a supplier of data processing offload solutions on programmable hardware for accelerating telco/cloud networks, was named as a “Vendor to Watch” in a February 2020 Gartner research report titled Market Trends: Function Accelerator Cards Disrupting Traditional Ethernet Adapter Market.

Recommendation and Target Price

If Ethernity can progress revenue as we forecast for 2021 and achieve confirmed design wins in 5G, its valuation could be substantially higher than it is now. The current depressed valuation does not reflect the IP, market interest already achieved, and limited number of players in the space, leaving the company a potential takeover target. Our peer group analysis supporting a DCF valuation, sets a target price of 52p/sh implying 188% upside and we initiate with a Buy recommendation.

Phil Smith, Equity Analyst, Technology | T: +44 (0)20 3617 5187 | E: [email protected]

VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD | www.vsacapital.com

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