M Partners analyst Ron Shuttleworth says the business Redknee (TSX:RKN) acquired through Nokia Siemens Networks is showing signs of stickiness and stability.
Shuttleworth notes that, over the past few days, Redknee has announced some meaningful customer renewals. He believes each of these deals will represent $3-million to $4-million in annualized revenue, and many are incorporating room for future LTE developments. He says this suggests to him that the Nokia Siemens Networks business will be low churn.
This development, says Shuttleworth, has led him to raise his revenue estimate on the company for fiscal 2014. In a research update to clients this morning, the M Partners analyst maintained his BUY recommendation and increased his 12-month price target on Redknee to $3.75, up from $3.30.
Last December, Redknee surprised the market with the announcement of the $54-million acquisition of certain assets owned by Nokia Siemens Networks’ Business Support Systems. Shuttleworth, who called the acquisition “transformational”, said Redknee had gained a major footprint into the tier-one carrier market, instantly adding 35 such customers. Redknee added a total of 130 customers in ninety countries, 90% of which were new to the company.
Shares of the Mississauga-based company, which had been languishing at just over a dollar in the time before the acquisition, have nearly tripled in the time since.
Shuttleworth estimates that Redknee acquired about $170-million in revenue as a result of the acquisition, and he now believes that the company should be able to grow that by about 10% in fiscal 2014. Today, The M Partners analyst moved his revenue estimate for Redknee’s fiscal 2014 to $255.6-million, up from $238.6-million he had previously modeled.
Shares of Redknee closed today down 1.3% to $3.10.