Cantech Letter Analyst Poll Picks end Q1 up 15%

Hat Trick: Early this year, Versant Partners Director of Research Tom Liston said investors should be watching SXC Health, CGI Group and Descartes Systems. All three posted strong double digit gains in the first quarter of 2012.

In Canada, tech analysts today are about as common as fifty goal scorers in the NHL; there just aren’t many left. Those that remain after a decade long resource boom, however, appear to know their stuff.

In January, we asked some of the top tech analysts in the country; Sameet Kanade of Northern Securities, Tom Astle and Byron Berry of Byron Capital, Pardeep Sangha of PI Securities, Barry Richards of Paradigm Capital, and Tom Liston of Versant Partners which stocks they would be watching closest in 2012. The Toronto Stock Exchange closed the first quarter today up 3.5%; not bad. Our analysts picks, on the other hand, have raced ahead of that, up 15% so far this year. Here’s the breakdown.

1. Research in Motion (TSX:RIM) -1.1%
December 30th: $14.80
March 30th: $14.63

Three months into 2012, last year’s creeping negativity about RIM has turned to near consensus. But after another under performing quarter, some are wondering how much downside could be left on the Waterloo mobile player. Byron Capital’s Tom Astle, who does not have a target price on the stocks pegs the breakup value of the stock at $12, plus approximately $2 a share for its patents. In other words, vastly lowered expectations means RIM probably won’t be grabbing headlines as much this year. Late in 2011, Northern Securities analyst Sameet Kanade upgraded Research in Motion to a Speculative Buy. “No, this is not a typo” he said in a note to clients.

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2. CGI Group (TSX:GIB.A) +15.8%
December 30th: $19.20
March 30th: $22.23

CGI’s Q1, reported on the first day of February, showed the company earned $106.5 million on revenues of revenue of $1.03-billion. Both numbers were down from the same period in fiscal 2011, but investors were instead focusing on the company’s growing backlog of signed orders, which, at the end of December, 2011, grew to $13.6-billion, up $578-million compared with the same period last year. CGI was a top pick of Versant Partner’s Tom Liston.

3. SXC Health (TSX:SXC) +30.9%
December 30th: $57.27
March 30th: $74.94

Late in February, SXC Health reported its fiscal 2011 results. The company’s revenue grew a whopping 155% to $5 billion, from $1.9 billion in 2010. Earnings were way up too, increasing 45% to $166.4 million. If Canadians aren’t noticing SXC, the rest of the world is beginning to; the company took home top spot in Fortune Magazine’s 2011 100 Fastest Growing Companies list, an award won in 2009 by Research in Motion. SXC was also a top pick of Tom Liston. Click here for Nick Waddell’s recent interview with SXC Health boss Mark Thierer.

Tom Astle, Head of Research at Byron Capital Markets, says keep an eye on Wi-LAN.

4. Wi-LAN (TSX:WIN) -11.9%
December 30th: $5.87
March 30th: $5.17

Wi-LAN may be down, but Byron Capital’s Tom Astle says the company is far from out. Astle thinks the value of patents will continue to be high and could drive revenue growth in 2013, when he thinks the company will grow by 25%. Wi-LAN CEO Jim Skippen agrees, he has been a regular buyer of his company’s stock of late.

5. Descartes Systems Group (TSX:DSG) +18.9%
December 30th: $7.32
March 30th: $8.70

M Partners analyst Ron Shuttleworth, a regular contributor to Cantech letter who could not contribute to this list for logistic reasons, says Descartes is a category busting company. Until now, Shuttleworth arrived at a valuation on Descartes by combining industry valuations of traditional logistics vendors and software-as-a-service vendors, then derived a mid-point multiple based on blending those two categories.But Shuttleworth says that Descartes bears little resemblance to logistics companies such as as Ariba (NASD:ARBA), which has a 3 Year Compound Annual Growth Rate of 12.4% or Manhattan Associates (NASD:MANH), which has a 3 Year CAGR -0.8%. Instead, suggests Shuttleworth, Descartes is more like SalesForce.com, which has a CAGR of 28.2% or NetSuite, with a CAGR of 15.7%. Companies in this category; software as a service/cloud vendors for the supply chain, deserve higher EBITDA multiples, he reasons. After Descartes reported its fiscal 2012 results on March 8th, Shuttleworth raised his target price on the company to $12. Descartes is also a favorite of Versant’s Tom Liston.

Hey, Vancouver has a tech analyst too! Points International, a top pick of PI's Pardeep Sangha, was up a whopping 35.9% in the first quarter of 2012.

6. Points International (TSX:PTS) +35.9%
December 30th: $7.75
March 30th: $10.53

Toronto-based Points International manages the back end of loyalty currencies, frequent flyer miles, hotel points, retailer rewards and credit card points. The company has more than fifty partners worldwide including Delta, BestBuy, Starbucks and PayPal. Points has grown its revenue from $30 million in 2007 to more than $95 million in fiscal 2010. PI’s analyst Pardeep Sangha’s crystal ball was working well on Points; on March 7th, the company reported fiscal revenue of $123.-million, which was up 28% of the year prior.

7. Poynt (TSXV:PYN) -19.2%
December 30th: $.13
March 30th: $.105

A tough go of things so far this year for Poynt shareholders, but the company has been far from dormant. The app, which now has more than twelve-million users, and has grown 158% in the past year alone, has made recent inroads into China, where management expects to deliver at least twenty-million users by early next year. And, late last year, the company announced that Poynt will come preloaded on all Samsung Galaxy devices.

8. 01 Communique (TSX:ONE) +79.2%
December 30th: $.53
March 30th: $.95

It looked like 01 Communique, which has been has been around since 1992, was down for the count after in April of last year, when a judge ruled that the Mississauga company’s case against LogMeIn (NASDAQ:LOGM) would not go to trial. But with a little help from Wi-LAN, 01 is getting its mojo back. 01 became the first client of Wi-LAN’s newly launched Gladio IP, a division of the Ottawa-based patent player that works with other companies to try and unlock the value of their patents,

9. QHR Technologies (TSXV:QHR) -3.2%
December 30th: $.62
March 30th: $.60

Not much in the way of news flow for the now consistently profitable QHR, but on Thursday the company did announce that its Electronic Medical Records division, OptiMed Software, was granted Canada Health Infoway’s electronic medical record National Class certification. CEO Al Hildebrandt, said the move “affirms QHR as a market leader in the EMR industry in Canada.”

10. Tio Networks (TSXV:TNC) +4.2%
December 30th: $.48
March 30th: $.50

Tio Network’s Q2, reported this past week, shows the Vancouver company is making progress in billing solutions to the “unbanked” and “underbanked” segments of the population. Revenue for the quarter was up 23% over the same period last year. Analyst Sameet Kanade has a $1 target on Tio.

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