Analyst Ron Shuttleworth raises target on BSM Technologies

Yesterday, BSM announced that it had been awarded contract with the Metropolitan Transportation Authority of New York to equip the MTA’s Long Island Rail Road (LIRR), Metro-North Railroad (MNR) and Bridges & Tunnels (B&T) vehicles with up to 1420 Sentinel FM units and provide five years of service, with an option to extend the service for an additional five years.

The deal, says management, will be worth up to $4.2 million if all options are exercised.

CEO Aly Rahemtulla said the order further solidifies the company’s leadership position in the rail vertical.

“This contract further strengthens BSM’s leading position in the rail market,” he said “Our proven track record of working with Class I railroads is translating into wins with other large rail customers. We are leveraging our experience with these top-tier referral accounts to continue our sales momentum in the sector.”

Shuttleworth says that as a result of the deal he is adding approximately $1.1M of revenue to his fiscal 2014 estimates, consisting of $0.6-million of hardware in each of Q1, 2014 and Q2 2014, and approximately $0.2-million of recurring revenue in each of Q3 and Q4. The M Partners analyst says he is comfortable with the 17x EV/EBITDA multiple he assigns to BSM, noting that its nearest comparables, Fleetcor and Fleetmatics, trade at equal or higher multiples.

This morning, in a research update to clients, Shuttleworth maintained his BUY rating on BSM, but raised his one-year price target to $3.15, up from his initiation of coverage target of $2.75.

Shares of BSM Technologies closed today up 4.1% to $2.80.

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