Sensio signs deal with Hisense, Northland’s Garcea has $1.50 target

Today’s news from Sensio means the Montreal based company now has agreements with the top two 3DTV manufacturers in China, having inked a similar agreement with TCL in July.Sensio (TSX:SIO) today announced it had signed a deal with for the integration of Sensio high-fidelity 3D and Sensio S2D switch in Hisense 3D TVs.

Sensio’s patent protected S2D switch allows users to switch viewing mode of a 3D feed from 3D to 2D or between different 3D view modes.

Original equipment manufacturer Hisense, which sells products under several brand names, is the number one TV brand in China and the fifth largest in the world.

Hisense vice-general manager Shao Jiancheng commented on the deal “….Sensio’s format is a decisive component to distinguish ourselves from the competition in terms of quality and innovation. We are convinced that combining efforts and expertise with a company as innovative and dynamic as Sensio will definitely enhance our international influence as well as our strategic positioning in the 3-D industry.”

Northland Capital Partners analyst Ralph Garcea says that Hisense has an annual output of 16.1 colour TVs. He estimates it will ship approximately four million 3D TVs in 2013, which would drive approximately $2-million in revenue for Sensio. Today’s news, he says, means the Montreal-based company now has agreements with the top two 3DTV manufacturers in China, having inked a similar agreement with TCL in July. In a research update to clients today, Garcea reiterated his Sector Outperform rating and $1.50 price target on Sensio.

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Founded in 1999, Montreal-based Sensio develops and markets stereoscopic image-processing technologies that facilitate the creation and delivery of 3D content. In 2009, right around the time that James Cameron’s Avatar was released, shares of the company started to catch fire. The stock was one of the best performers on the entire exchange that year, rising from pennies to nearly $4 by Christmas.

A public perception that 3D was falling from favour has since sent the company’s stock into a tailspin. But CEO Nicholas Routhier says the pessimism does not match the facts about what is actually happening with 3D right now. He says 3D adoption is actually outpacing the adoption of high-definition televisions by 50% from the moment of their respective launches. The Sensio CEO cites analyst reports forecasting that by 2015, half of all HDTVs sold worldwide will be 3D, a number that amounts to more than 100-million units. Because of key relationships and wide ranging patents, Sensio is actually a better company than it was three years ago, contends Routhier.

Garcea says his target scenario is based on the investment premise that Sensio’s distribution/display patents will be gradually adopted one content provider and technology manufacturer at a time. His target scenario has the company reaching 5% of its addressable market through end use in platforms such as TVs, monitors, gaming consoles, satellite receivers and laptops. Downside peril, says the NCP analyst, comes from the possibility that distributors might adopt multiple technologies. But If Sensio’s technology becomes a worldwide standard, he says, the upside is much higher, making Sensio a takeout candidate at a price of approximately $3 a share.

Shares of Sensio closed today up 17.6% to $.40 cents.

Disclosure: Cantech Letter Editor Nick Waddell owns 50,000 shares of Sensio, which he purchased in the open market On Friday, March 2nd and Monday, March 5th.

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