Kraken Robotics is undervalued, Beacon Securities says

Canada’s Ocean Supercluster initiative could be a boon to Kraken Robotics (Kraken Robotics Stock Quote, Chart: TSXV:PNG) Beacon Securities analyst Gabriel Leung says.

Last week, the federal government announced $153-million in funding for the ocean supercluster initiative, a network of more than 100 businesses, postsecondary institutions and non-profits looking to generate new technologies for Atlantic Canada. It is projected that the initiative could create 3000 jobs and add $14-billion to the Canadian economy over the next decade.

Leung says Kraken is well positioned to be a direct benefactor of the program.

“As it relates directly to Kraken, the company has submitted a proposal called OceanVision, which is a 3-year, $25M project to provide high definition seabed data across the stakeholder sector (i.e. offshore oil and gas, seafood, ocean science, ocean renewable energy, and defence),” the analyst notes. “We understand the company has also been invited as a keynote speaker at the Ocean Supercluster Technology Leadership Project sessions. In our opinion, a successful award could be a significant catalyst in terms of increasing the backlog, but also proving out the company’s
Robotics-as-a-Service initiative, which we view as an important longer-term growth catalyst for the company (i.e. high margin, recurring revenues).”

In a research update to clients today, Leung maintained his “Buy” rating and one-year price target of $0.75 on Kraken, implying a return of 63 per cent at the time of publication.

Leung thinks Kraken will generate EBITDA of negative $1.9-million on revenue of $6.8-million in fiscal 2018. He expects those numbers will improve to EBITDA of negative $900,000 on a topline of $10.0-million the following year.