Byron Capital’s Tom Astle Says Wi-LAN’s Growth Likely Not Done

Wi-LAN (TSX:WIN) today reported its fiscal 2011 results. The company’s topline of $105.8-million was an increase of 115% compared to 2010’s $49.2-million number. Earnings were a record, too, coming in at $71.5-million, or $.58 cents per share, compared to $4.8-million, or five cents per share, in 2010.

Byron Capital’s Tom Astle says that, despite the fact that the shock and awe period of Wi-LAN’s stunning rise in revenue may be over, especially considering a fourth quarter he considered soft, there are still more things to like about the Ottawa patent player than not. In a research update today, Astle reiterated his BUY rating and $7 target on Wi-LAN.

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Wi-LAN, which founded in Ottawa in 1992, developed a range of communications and consumer electronics products including routers, 3G handsets and WiMAX base stations. The Company now has more than three-thousand patents, and has already licensed their technologies to blue chip techs such as Cisco, Nokia, Panasonic, Samsung. Wi-LAN sprung to life after MOSAID employee Jim Skippen was unsuccessful in convincing his employer to become a pure patent play, and left for Wi-LAN, from whom he was negotiating the purchase of patents. The company is now no stranger to patent infringement claims, having launched actions against dozens of multinationals, including Apple, Hewlett-Packard, Intel, Sony and Toshiba. Under Skippen’s watch, the company’s revenue has climbed from just over $2 million in fiscal 2006, to the more than $100 million the company reported today. Wi-LAN has quietly become one of the world’s top patent acquirers, on par or better than Apple, Google and Samsung in the third quarter of 2011.

Astle says that while expense guidance revealed that litigation costs were higher than expected, this may actually be a positive indicator as higher litigation costs mean greater potential for bigger license fees. Astle estimates that Wi-LAN will post revenue of $106 million in 2012 and an adjusted EPS number of $0.55 cents per share. The Byron Capital analyst, however, says he isn’t “crazy about their (or their peers) definition of adjusted earnings as it excludes the amortization of patents. If this is included we get an adjusted (our definition) EPS of closer to $0.32.”

But Astle says while Q4’s numbers might suggest the company has plateaued, he actually believes “the new and current patent portfolio combined with current and upcoming licensing (litigation) activity could drive revenue growth significantly in 2013, where we are modelling about 25% revenue growth.”

Shares of Wi-LAN closed today up 3.7% to $5.08.

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