SaaS-based player BSM Technologies (TSX:GPS) is well positioned to gain market share in the fragmented fleet tracking space, says Cantor Fitzgerald Canada analyst Blair Abernethy.
In a research report to clients this morning, Abernethy initiated coverage of BSM with a “Buy” rating and $3.00 one-year target.
Abernethy says the telematics industry has literally hundreds of providers who have struggled in the space because their solutions are largely hardware focused, and they have become commoditized. He says there is now a growing demand for machine-to-machine solutions that collect data and automate manual processes. He thinks the foothold that BSM has gained in the rail sector not only has room left for growth, but could be used as leverage that could complement or augment new verticals.
The Cantor analyst notes that while BSM currently is the dominant player in Canadian rail support, its has been deployed to just 19% of the rail support vehicle fleets here. He expects that number will grow to in excess of 40% over the next two years.
Abernethy says additional growth for BSM can come in the form of new verticals, M&A, and geographic expansion. He cites a report from Berg Insight that says there are 35-million commercial vehicles in North America, an estimated $8.4-billion opportunity. There are currently 12-million storage tanks in the U.S., another potential vertical for BSM.
Valuation-wise, Abernethy says BSM is trading at a mere 2.6x EV/Sales based on his 2015 estimates. Industry comparables, he notes, are trading at 4.1x.