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Paradigm lowers target on BSM Technologies, keeps “Buy” rating

BSM Technologies
BSM Technologies
BSM Technologies CEO Aly Rahemtulla.

An increased level of investment in sales, marketing and R&D will impact BSM Technologies’ (BSM Technologies Stock Quote, Chart, News: TSXV:GPS) EBITDA margins, says Paradigm Capital analyst Gabriel Leung.

In a research update to clients yesterday, Leung maintained his “Buy” rating on BSM, but lowered his one-year target on the stock from $3.00 to $2.75. The analyst’s new price target implied a return of 67% at the time of publication.

Leung says that while he is maintaining his fiscal 2015 revenue forecast of $34.6-million, he is lowering his expectation on EBITDA margins from 22.8% to 15.5%. He says this actions reflects his view that “the company will likely increase investments in key operating areas, such as sales and marketing and R&D”.

The analyst says he remains bullish on BSM because of a growing backlog of enterprise customers, its strong vertical focus, and what he says are initial signs of cross-selling activity. He notes that the telematics space is a particularly acquisitive one and thinks BSM is a potential takeout target.

In BSM’s upcoming fourth quarter, Leung expects the company will generate EBITDA of $946,000 on revenue of $7.4-million, with 12.8% EBITDA margins.

At press time, shares of BSM Technologies were up 1.2% to $1.70.

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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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