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Clarus initiates coverage of Wi-LAN with a BUY rating, $7 target

Clarus Capital analyst Sean Peasgood thinks 2013 could be a mirror image of 2011 for Wi-LAN. The analyst initiated coverage of the company Tuesday with a $7 target.
Clarus Capital analyst Sean Peasgood thinks 2013 could be a mirror image of 2011 for Wi-LAN. The analyst initiated coverage of the company Tuesday with a $7 target.

After a run that began in 2009 and ultimately saw patent player Wi-LAN (TSX:WIN) become the most valuable tech stock in Ottawa, this year hasn’t been a thrill a minute for the company’s shareholders. Wi-LAN’s stock has tailed off slightly throughout the first half of 2012, mirroring the overall markets.

That trend will likely end soon, says Clarus Capital analyst Sean Peasgood. Peasgood believes Wi-LAN is setting itself up for a repeat of 2011 in 2013. He notes that the company is currently involved in five cases, with the first trial scheduled for March of next year. The Clarus Capital analyst points out that, despite having 255 licensees, the Ottawa-based company has actually never been to trial, meaning the likelihood of negotiated settlements in the coming months is high. On Tuesday, Peasgood initiated coverage of Wi-LAN with a BUY rating and a twelve-month target of $7.

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Wi-LAN was founded in 1992, commercializing 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 in fiscal 2011. 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.

Recent pressure on the company’s share price means Wi-LAN has become a relatively low-risk play, says Peasgood. By adding up the cash the company has on hand, a “fire sale” price for the patents it holds, and the value of its backlog, the analyst arrives at a “base case scenario” price of $4.16 a share.

Peasgood believes Wi-LAN could earn $.57 cents a share in 2013, which at twelve times earnings plus cash would support a value of $8.50.

At press time, share of Wi-LAN were down 1.9% to $5.07.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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