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DIRTT Environmental “at the tipping point of market acceptance”, says Paradigm

DIRTT Environmental’s Green Learning Center on Toronto’s Wellington Street.
DIRTT Environmental’s (TSX:DRT) recent secondary is a positive because it reduces perceived overhang in its market and curbs its debt levels, says Paradigm Capital analyst Spencer Churchill.

On June 17th, DIRTT announced that it had completed a secondary financing that saw numerous shareholders sell more than seven-million shares at $2.60 a share to a syndicate of underwriters led by Raymond James. Although the company didn’t receive any of the proceeds, the offering did result in the conversion of more than $5-million dollars in principal and accrued interest outstanding on the company’s 14% senior subordinated convertible notes, which were held by some of the selling shareholders.

Churchill says the secondary was a tidy positive for DIRTT, and he expects the same in November, when another 17.7-million shares will be released from lock up. But more important news, says the Paradigm analyst, came in the form of the company’s largest-ever contract, which was announced June 5th.

Noting that the average size of DIRTT’s sales is about $75,000, Churchill says the $25-million plus that represents the company’s portion of the sale, which was made to a Fortune 500 oil and gas company, is a “material win”. He says the new contract reinforces his “…view that it is at the tipping point of market acceptance, with revenue growth set to accelerate, driving earnings leverage.”

In a research update to clients this morning, Churchill reiterated his “Buy” rating and $4.50 one-year target on DIRTT Environmental, implying a 41% return at the time of publication.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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