Hemisphere GPS is still undervalued, says PI’s Sangha

Yesterday, Hemisphere GPS (Hemisphere GPS Stock Quote, Chart, News: TSX:HEM) reported its Q4 and fiscal 2012 results. The company’s fiscal 2012 loss of $34.59-million probably didn’t come as a surprise to shareholders, who were made aware of a corporate restructuring in September that means a name change, new CEO and a new head office, amongst other initiatives.

New CEO Rick Heiniger was frank about the company’s performance.

“Management acknowledges that given the strength of the marketplace, our Agriculture business has underperformed for some time,” said Mr. Heiniger. “The new senior management is now in place and will be making improvements through 2013 and beyond. Our business strategy is being assessed and redirected as necessary to deliver shareholder value which we believe is long overdue.”

PI analyst Pardeep Sangha says his view on Hemisphere’s Q4 was mixed. Sangha says he is encouraged by the restructuring progress, but thinks the company’s top line will be impacted in the short term as it divests itself of its its non-agriculture businesses. In a research update to clients today, the PI analyst reduced his revenue forecasts for HEM, bit increased his EBITDA estimates because of the company’s successful cost-reduction strategy. Sangha says he is maintaining his BUY rating and $1.20 target on Hemisphere GPS.

Sangha says he believes Hemisphere GPS is undervalued. He expects the company’s growth will be driven by continued high commodity prices, high farmer incomes, and Outback MAX sales. He thinks the company’s topline will increase by 17% to $65-million in fiscal 2013, and the company’s EBITDA will come in at $8.1-million. He expects this growth will continue into fiscal 2014, with a topline of $73.4-million and EBITDA of $10.8-million.

Shares of Hemisphere GPS closed today up 2.8% to $.74.