The acquisition of PureWave Networks is another sign that Redline Communications (TSX:RDL) has completed its turnaround, says Cantor Fitzgerald Canada analyst Blair Abernethy.
This morning, Redline announced it had signed a definitive agreement to acquire the assets of PureWave Networks, a privately held wireless technology company based in Santa Clara, California, for $2-million.
“Redline currently provides mission-critical networks that operate in a wide range of wireless frequencies,” said CEO Rob Williamns. “LTE had been on Redline’s technology development road map and we expect that the PureWave technology will accelerate the development of LTE-based capabilities for our networks”.
Abernethy says that although PureWave is generating minimal revenue, it is a tuck-in acquisition that will broaden Redline’s product offering and accelerate its LTE plans. A developer of small cell and compact 4G wireless base stations, PureWave has already spent more than $30-million developing it LTE technology, notes the analyst.
Abernethy says he expects the acquisition will create selling opportunities in public safety and with service providers, but he does not expect it will generate material revenue until 2016.
In a research update to clients this morning, Abernethy maintained his “Buy” recommendation and one year target of $4.50. His target, he notes, implies a multiple of 1.2x his expectations his estimate of fiscal 2015’s EV/Sales.
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