The increasing adoption of convergent billing systems by communication service providers and medium and large enterprises represents a major opportunity for NTG Clarity Networks (TSXV:NCI), says Global Maxfin Capital analyst Ralph Garcea.
Yesterday, Garcea initiated coverage of NTG Clarity Networks with a BUY rating and a $1.00 target price.
Garcea says NTG provides investors with an opportunity to participate in the rapidly expanding Operations Support System/Business Support System (“OSS/BSS”) space. He says that telecom players will need to invest significantly in their network infrastructure to increase their average-revenue-per-user numbers and lower their churn rates. The company’s core product, NTS is an on-premise OSS/BSS solution that will help them do that.
The global market for convergent billing, notes Garcea, is expected to grow at a compound annual growth rate of 24% between 2011 and 2016, according to a recent report from Infonetics, who see the market reaching a total value of (US) $3.4-billion by 2016.
Garcea says NTG has a foothold in Saudi Arabia and Egypt, where it derives the bulk of its current revenue. He says that while this is a good place to be, particularly with the strong growth of the Saudi market, he expects the company will look to parlay this into a stronger presence in the Middle East and North African market as a whole.
Noting that NTG has been profitable in 27 of the last 33 quarters, Garcea says he expects the company will pass the $10-million revenue mark this year. Going forward, he says he expects NTG will generate gross margins in the 44-48% range and EBITDA margins in the 30-33% range.
At press time, shares of NTG Clarity Networks were up 6.3% to $.425.