Still double-digit returns to be had on Sandvine, says Cantor Fitzgerald

Sandvine (TSX:SVC) had a strong balance sheet prior to today, but a $33-million bought deal puts the Waterloo company in an even better position to build and acquire technology, says Cantor Fitzgerald Canada analyst Blair Abernethy.

This morning, Sandvine announced it had entered into an agreement with a syndicate of underwriters led by Canaccord Genuity to sell, on a bought deal basis, 10 million common shares of the company at $3.30 per share. An overallotment option could swell the deal to $37.95-million. The deal is expected to close February 12th.

Abernethy says he expects that Sandvine will gradually shift its business to that of a pure software company because industry adoption of network virtualization technology will increase in the years to come.

The Cantor Fitzgerald analyst has a BUY rating on Sandvine and a $4.00 one-year target, implying a 17% return prior to today’s market open. For fiscal 2014, he expects Sandvine will post EBITDA of $28.4-million and EPS of $0.15 on revenue of $129.3-million, which would be a 21% topline bump. For fiscal 2015, he expects EBITDA of $37.8-million and EPS of $0.21 on revenue of $153.3-million.

Shares of Sandvine closed today down 6.1% to $3.22.

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