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Guestlogix should sell for at least $1.10, says Northern analyst Kanade

Northern Securities analyst Sameet Kanade says he expects Guestlogix will trade on a potential takeover basis going forward.
Yesterday, Guestlogix (TSX:GXI) reported its Q3, 2012 results. The company’s losses ballooned to $2-million on revenue of $5.9-million, which was off slightly from the same period last year.

But Guestlogix CEO Brett Proud, who took over from co-founder Tom Douramakos last week when the company announced a strategic review, said things are looking up for the Toronto-based concern whose stock has been falling since early 2010.

“While revenue was up year over year and remained flat sequentially, we took some one-time charges primarily related to closing projects that placed downward pressure on our bottom-line results for the quarter, ” he said, adding: “Going forward, we are confident that our market leadership position, global talent and product portfolio, combined with a more focused approach, position us to better capitalize on the growth opportunities available to us.”

Northern Securities analyst Sameet Kanade says Guestlogix’s Q3 was lacklustre, but he anticipated that. He says in light of the announced strategic review, he expects the company will trade on a potential takeover basis going forward. Although management has left open the option of continuing to grow its business organically, Kanade says he believes the outcome of the review process will result in a sale of the company. Based on a based on an EV/EBITDA multiple of 12.5×, he says investors should expect a bid of at least $1.10. In a research update to clients today, Kanade reiterated his BUY rating and $1.10 target on Guestlogix.

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Guestlogix was formed in 2002 and has since become the dominant player in the business of delivering ancillary revenue to airlines, with contracts to service more than a billion trips annually. At last year’s M Partners Technology Conference in Toronto, Douramakos pointed out that all little extras; a fee for your second bag, a surcharge for reserving your seat in advance, are actually saving the industry, producing close to $60 billion in revenue last year. Without this ancillary revenue, the airline industry would still be a losing game. Guestlogix’s revenue has grown from just $5.43 million in fiscal 2007 to $22.8-million in 2011. The company’s stock, meanwhile, has moved the other way, falling from nearly $2 in early 2012 to recent lows under $.40 cents.

Shares of Guestlogix closed today up 4.8% to $.65 cents.

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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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