Espial is likely to sign a deal with Rogers, says Mackie

While there was no confirmation with Rogers’ third quarter results, the signs are everywhere that Espial (Espial Stock Quote, Chart, News: TSX:ESP) is working with the Canadian telco, says Mackie Research Capital analyst Nikhil Thadani.

This morning, Rogers released its Q3, 2015 results. Thadani says the company’s conference call following the results helped throw fuel on the fire to the long-rumoured idea that Espial is working with Rogers on its new set-top boxes.

Thadani also pointed to an October 5 press release in which Rogers launched 4K TV and a 4K set-top box that will broadcast more than 100 live sporting events, including every 2016 Blue Jays home game with 4K-ready gigabit Internet speeds, a new 4K set-top box, Rogers 4K TV, and the “world’s largest commitment to live sports broadcasting in 4K.”

“4K TV sets have been in the market for some time and 40 per cent of all TV sales are likely to be 4K this holiday season. However, until now live TV broadcasts in 4K have been few and far between and customers have not been able to get 4K set top boxes,” said Rogers CEO Guy Laurence. “We are solving both problems in one go with the world’s largest commitment to 4K broadcasting and a new 4K set top box for customers that will allow customers to see sports and entertainment in the highest resolution and with the fastest internet speeds. 4K gets you closer to the action than the linesman and first base coach, and HDR brings those images to life with intense colour and contrast.”

Thadani says he think the rumours are true, and that this is a very positive sign for Espial.

“While there was no official confirmation of ESP software present on new Rogers Set Top Boxes (STBs) with Rogers’ Q3 results this morning, we are more comfortable with our ESP Rogers mosaic theory,” he said. “A confirmation of ESP’s presence on these STBs is a widely anticipated positive catalyst for ESP stock. If ESP’s North American customer is Rogers (as widely expected) and “block” licenses are ordered in advance (not unreasonable given Rogers’ marketing push), ESP’s Q1/16 could benefit tremendously.”

In a research update to clients today, Thadani maintained his “Buy” rating and one-year target price of $5.50 on Espial, implying a return of 50% at the time of publication.

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