Since peaking at more than $9 last summer, shares of the Ottawa-based patent player trickled off, tripping to under $5 this past May.
Mr. Market may be fickle about Wi-LAN’s price, But Byron Capital analyst Tom Astle says the opportunities for the company are as good as they have ever been. In a research update to clients Monday, Astle detailed the value proposition that is Wi-LAN’s stock at current levels, and reiterated his BUY recommendation and $7 twelve month target.
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Noting that the Jim Skippen-led company derives 80% of its revenue from long-term fixed payment contracts with well-funded tech names, Astle says Wi-LAN is an attractive and reasonably defensive option for investors. He says if you add up the nearly $200-million in cash the company has on hand, the value of its existing licenses, which he estimates at $278-million, plus the value of its unlicensed patent portfolio, which he pegs at $150-million, you get a base value of $624-million, or $5.12 per share. This, says Astle, means buying Wi-LAN at current levels means you are buying all future opportunities for free.
Astle says three recent developments could add value to Wi-LAN. First, the Byron analyst says there is a strong possibility that Wi-LAN could be asked by a major patent holder to help assert its patent portfolio sometime in the next year. He points to the deal between Nokia and Mosaid as an example of the form such a deal would take. Second, Astle says the recent win for Wi-LAN division Gladios IP in the case of Bomgar vs. 01 Communique, while not financially material, establishes a precedent that could lead to Gladios going after bigger fish. Lastly, he says that while LG did win an early round in its V-Chip defensive case against Wi-LAN, the U.S. patent office has since upheld the Wi-LAN V-Chip patents and, more importantly, allowed thirty more claims.
At press time, shares of Wi-LAN on the TSX were up 1.7% to $5.27.