Byron Capital's Tom Astle: Hang on to your RuggedCom

RuggedCom President and CEO Marzio Pozzouli. Byron Capital analyst Tom Astle think the $22 all-cash offer the company received on Monday from Belden Inc. may be followed by others.

Ruggedcom (TSX:RCM) is the talk of the TSX today after St. Louis-based Belden (NYSE:BDC), a manufacturer of signal transmission and networking products used in demanding environments, made a $22 all cash offer for the Vaughn, Ontario base company.

But as the the stock’s closing price on Monday, $22.69, might suggest, some think the Belden offer might not be the last.

In a note to clients this morning, Bryon Capital analyst Tom Astle says that while the offer represents a premium of 62% over Friday’s closing price of $13.61, the move could be just the first in a number of bids. Astle says those who might be interested in Ruggedcom include deep pockets such as ABB, Siemens or Schneider Electric.

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RuggedCom, as its name suggests, makes communications and networking equipment used in hostile or demanding environments. Success in the electric power and transportation markets have meant growth for the company, from $39 million in 2008, to nearly $94 million in fiscal 2011.

Astle believes that while Ruggedcom is profitable, it could be much more profitable as part of a larger entity. On Monday, he raised his target price on the company to $25 from his previous target of $21 because he thinks RuggedCom could achieve up to $1.90 a share in earnings for an acquirer. Multiplying this number by fifteen times equals $28 a share. With the downside on the stock now seemingly limited to Belden’s initial $22 offer, Astle recommends hanging on to Ruggedcom while the situation plays out.

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