M Partners says International Datacasting is still a Buy

In November of 2009, former fund manager Adam Adamou got the band back together.

Adamou called on two investees from his venture capital days, Fred Godard of Canadian broadcast pioneer Leitch Technologies and Frank Ruffolo of Softquad International. The trio acquired about 20% of Ottawa’s International Datacasting Corporation (TSX:IDC), a 25 year old broadcast technology company that was struggling with escalating costs and declining revenues.

Less than a year later, with Godard in place as President & CEO and Adamou as Executive Chairman IDC reported one of its best quarters ever.

So two years along, how are they doing?

The Ottawa company’s most recent quarters have been a mixed bag. While the $8.4 million IDC delivered in Q1 2012 made it the best first quarter the company had ever recorded, revenue wise, the company lost more than half-a million dollars. Q2’s revenue was off from Q1, but the company put $87K to the bottom line.

But M Partners says no reason to worry about International Datacasting, who report their Q3 2012 earnings on Monday. In a morning note Thursday, M Partners reiterated its Buy recommendation and $0.50 price target on IDC.

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M Partners says IDC has been affected by a slower than expected implementation of one of its most important projects, a partnership with the The Wananchi Group, a company formed in 2007 that has already become the leading residential provider of cable and internet service in Kenya. The project will roll-out direct-to-home broadcasting service that will provide television programming to the Sub-Saharan region of Africa.

While three orders in Africa were delayed due to economic uncertainty, M Partners expects those will be back on track because The Wananchi Group recently scored $67M in additional funding.

M Partners expects International Datacasting Q3 revenue to come in at $9.4M, which would be up 5.5% over fiscal 2011.

At press time, shares of International Datacasting were even at $.275 cents.

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