2013 was the year the Canadian tech sector was waiting for. Sure, the previous year boasted some nice gainers, but that storyline was complicated by the fact that some of those bumps were simply takeovers premiums paid by larger, often U.S.-based companies, who were taking Canadian innovators away for good.
But this year was different. The excitement returned to tech in the form of a bunch of new listings (many were RTOs) and multi-year highs for many stocks that frankly deserved to be trading at multi-year highs, based on their underlying performance, which had been persistently overlooked.
What’s next? One of the street’s top analysts, Blair Abernethy, recently landed at Cantor Fitzgerald Canada after becoming a free agent when resource focused Stifel Nicolaus decided to shutter its Canadian operations.
“Stocks won’t move in a straight line up!”, says Abernethy, who says he sees longer trends powering the tech space. “We see the sector as attractive as many technology companies offer good growth prospects in a slow-growth macro environment. Growth is being driven by new products, recurring revenue models, international expansion and accretive acquisitions, all of which can continue for some time.”
The ten top performing TSX tech stocks all posted triple-digit gains in 2012. We count them down in order, ommiting those that began the year at a dime or less. With a few weeks left to go in the year this is, of course, not the final list. But this will give you an idea of some of the candidates for the Cantech Letter Awards, which begin the voting process this week.
1. Redknee (TSX:RKN) +246%
CEO: Lucas Skoczkowski
December 31st, 2012: $2.08
December 6th, 2013: $7.20
A year ago, Redknee surprised the street with the bold acquisition of assets from Nokia Siemens Networks. The company proved it had the discipline to handle the massive pickup by eliminating low margin sales, getting the interest of existing Nokia Siemens Networks customers and continuing to navigate the general surge of interest in its own cloud-based billing solutions.
2. Mitel Networks (TSX:MNW) +234%
CEO: Richard McBee
December 31st, 2012: $3.03
December 6th, 2013: $10.12
After a bit of a bumpy start to its return to the Canadian markets, Mitel erased all doubt about its ambition in November, when it acquired Aastra Technologies for $392-million. Cormark analyst Richard Tse believes that the combined entity of Mitel and Aastra, which will boast sales of $1.1-billion, will have potential synergies from a product and operations standpoint, supply chain optimization and facility consolidation.
3. Avigilon (TSX:AVO) +171%
CEO: Alexander Fernandes
December 31st, 2012:$11.70
December 6th, 2013: $31.68
2012’s Cantech Letter Canadian Tech Stock of the Year put itself in the running again this year when its Q3 results skirted the line between solid and spectacular. On November 5th, Avigilon announced it had earned $0.23 a share in its third-quarter on revenue of $51.1-million, up 101% over the same period a year prior. The street had been expecting earnings of $0.05 on $40.4-million in revenue. Cantor Fitzgerald analyst Justin Kew says management’s stated goal of reaching $500-million in revenue by the end of 2016 now appears perfectly within reach.
4. Solium Capital (TSX:SUM)+170%
CEO: Mike Broadfoot
December 31st, 2012:$2.65
December 6th, 2013: $7.15
SaaS was King in 2013 and no one in Canada made hay like Solium Capital. While solving the increasingly complex tangle that is corporate equity share plans, the company posted strong double-digit growth. Solium’s revenue increased by 37% to $16.9 million in the third quarter of 2013.
Attend the Fourth Annual Cantech Letter Awards
The Fourth Annual Cantech Letter Awards, brought to you by Difference Capital, will take place on-site, immediately following the Cantech Investment Conference on January 16th at the Metro Toronto Convention Centre. Individual general admission tickets for the gala dinner event are $150. A limited number of tables (10 seats) are available for $1500. Contact Karen Renaud at Cambridge House to reserve. ([email protected] or Direct at (604) 398-5356). This event will sell out, so please book early to avoid disappointment
5. PNI Digital Media (TSX:PN) +167.5%
CEO: Kyle Hall
December 31st, 2012:$.40
December 6th, 2013: $1.07
Shares of PNI Digital Media took flight in the latter half of 2013. The company, which announced deals with household names like Walgreens and Office Depot, says it is seeing growth in the photo market spurred by higher value items such as photo books and canvases. Management says a key development was transitioning its clients to a model in which it gets paid based on percentage of retailer’s revenue earned instead of the number of photos they upload.
6. Sierra Wireless (TSX:SW) +157.3%
CEO: Jason Cohenour
December 31st, 2012: $7.92
December 6th, 2013: $20.38
They said it. They did it. 2013 was the year Vancouver-based Sierra Wireless accomplished its most important corporate goal. In April, the company completed the sale of its AirCard unit to California-based Netgear, representing its last and largest move in becoming an M2M pure play. Cormark analyst Richard Tse says the M2M space is now being recognized as one of the large secular themes in technology.
7. Aastra Technologies (TSX:AHH) +151.9%
CEO(s) Francis and Anthony Shen
December 31st, 2012: $16.57
December 6th, 2013: $41.74
Aastra was always surprisingly high-beta stock, considering the relatively staid nature of its business. The company got its final leg up in November, when Ottawa-based peer Mitel paid $392-million for the company. Mitel says it will continue to leverage the Aastra brand in Europe.
8. Tucows (TSX:TC) +143%
CEO: Elliot Noss
December 31st, 2012:$1.37
December 6th, 2013: $3.33
Tucows (TSX:TC), whose name derives from an acronym for The Ultimate Collection of Winsock Software, is now into domain registration, and is the third largest ICANN-accredited registrar in the world. The company’s stock rose steadily all year on the back of improving numbers; the company’s Q3 revenue, reported November 13th, increased 22% to a record $35.6 million.
9. Points International (TSX:PTS) +129%
CEO: Rob MacLean
December 31st, 2012: $11.00
December 6th, 2013: $25.20
Toronto-based Points International lives at the corner of technology and loyalty programs, which in 2013 was a good place to be. Points International manages the back end of loyalty currencies, frequent flyer miles, hotel points, retailer rewards and credit card points. The company has more than fifty partners worldwide including Delta, BestBuy, Starbucks and PayPal. Points has grown its revenue aggressively, the company reported a topline of $30 million in 2007, it’s most recent quarterly revenue exceeded $54-million.
10. Sandvine (TSX:SVC) +106%
CEO: Dave Caputo
December 31st, 2012: $1.32
December 6th, 2013: $2.72
In the second half of 2013, Sandvine’s maturing channel partnership is creating greater earnings leverage for the Waterloo-based company, said M Partners analyst Ron Shuttleworth. After a recent series of bumpy results, Sandvine bounced back in the third quarter, earning $4.65-million (U.S.) on revenue of $27.2-million, a topline that was up 25% over last year’s third quarter.