Investors should take advantage of the current low price of Baylin Technologies (TSX:BYL) because any setbacks in its mobile business will be temporary, says Paradigm Capital’s Daniel Kim.
In a note accompanying its fourth quarter and year-end results on March 14th, Baylin management addressed a recent setback, pointing out that its revenue from the first half of fiscal 2014 would be affected by “a lower-than-expected allocation on a major product launch from its largest customer.” Shares of the company fell sharply.
Kim says the market is overreacting to the admission and has “written off” Baylin’s business with Samsung, which he thinks is a mistake. He says Baylin is uniquely positioned as the world’s sole publicly traded pure-play antenna company, and gives investors both a stable and innovative option to capitalize on the proliferation of wireless devices and the antennas they employ.
The Paradigm analyst says Baylin’s patent-protected LTE antennas are a “game-changer”. He says they allow consumers superior performance because they cover the entire frequency spectrum from 700MHz to 2.7Ghz, which no other antenna can do. This, he notes, means OEMs can design a single LTE phone for the global market instead of having to provide carrier specific designs. Kim believes vendors will also be funneled to Baylin because of the company’s strong patent portfolio in the space.
Kim cites one study that says LTE (otherwise known as “4G”) connections will grow from just 400-million this year, or 6% of total connections to to 2.5-billion, or 28% of all connections by 2020.
In a research update to clients this morning, Kim reiterated his “Buy” rating and $11.00 one-year target on Baylin Technologies, implying a 178% return, at publication date. The analyst says he derives his target by applying a 10x EV/EBITDA multiple to his 2015 estimates.