NCP analyst Ralph Garcea has $9 target on Wi-LAN

Life’s not so good. Northland Capital Partners analyst Ralph Garcea says he expects Wi-LAN will increase the pressure on LG in order to initiate the start of comprehensive settlement discussions around V-chip, digital TV, and 3D-TV lawsuits rather than risk a jury trial.

This morning, Wi-LAN (TSX:WIN) announced it had filed a patent litigation claim against LG Electronics. The suit claims infringement of two US patents related to digital TV and display technology.

Today’s news follows a busy week for Wi-LAN in which the Ottawa-based patent player partnered with New York-based General Patent Corporation, acquired a 4G patent portfolio from Alvarion, and launched suits against Alcatel-Lucent USA and Ericsson.

Northland Capital Partners analyst Ralph Garcea notes that today’s actions come on top of current litigation against LG for the V-chip patent Wi-LAN filed in New York, and could precede yet another case against the Korean conglomerate on the patents of Sensio. In September, Wi-LAN signed a multiyear exclusive license agreement with Montreal-based Sensio for the right to patents relating to 3-D technologies for digital displays and associated with Sensio S2D switch technology.

Garcea says he expects Wi-LAN will increase the pressure on LG in order to initiate the start of comprehensive settlement discussions around V-chip, digital TV, and 3D-TV lawsuits rather than risk a jury trial. In a research update to clients today, Garcea reiterated his Market Outperform rating and $9 price target on Wi-LAN.

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Late 2012 is shaping up to be a return to the action Wi-LAN shareholders became used to in recent years. Since peaking at more than $9 last summer, shares of the company trickled off, falling to under $5 this past May. The company’s trajectory over a longer time frame, however, has been decidedly up. Wi-LAN’s revenue has climbed from just over $2 million in fiscal 2006 to the more than $100 million in fiscal 2011. The Ottawa-based company 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. 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.

Garcea says with more than 3000 patents on its books, more tech patents in its pipeline, and $1.50 in net cash per share, Wi-LAN is well protected against downside risk. His $9 target scenario assumes twenty licenses per year, which he says will yield a compound annual growth rate of 11% and EBITDA CAGR of 13% through 2015.

Shares of Wi-LAN on the TSX closed today up 1.3% to $5.57.

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