In a reseach report to clients this week, Toronto-based Paradigm Capital released its top picks for the third quarter of 2016 and Canada’s technology sector was well represented.
Paradigm’s top picks include Dealnet Capital Corp., Absolute Software, Baylin Technologies, Opsens, and Sierra Wireless.
Analyst Corey Hammill likes Toronto based consumer finance company DealNet Capital Corporation (TSXV:DLS), which he believes will soon surpass $100-million in loan book, a considerable feat when marked against the mere $1-million loan book the company had earlier this year. Hammill has a “Buy” rating and a $0.90 one-year price target on the stock, which closed Wednesday at $.485.
Analyst Kevin Krishnaratne likes Vancouver-based software security firm Absolute Software (TSX:ABT). He says recent good news at the firm should continue.
“We are anticipating the initial rebound in results observed in Q3/16 to continue and accelerate heading into FY17 and believe the current valuation is an attractive entry point in advance of this dynamic,” says Krishnaratne. “The shares are inexpensive, trading at a dividend yield of ~5% versus their historic 3%, with our $9.00 target reflecting an EV/EBITDA multiple of 13.5x CY17e versus other Canadian Software peers at ~12–13x.”
Krishnaratne has a “Buy” rating and a one-year price target of $9.00 on Absolute Software, which closed Wednesday at $7.13.
Analyst Christopher Lam likes Quebec City-based Opsens (TSXV:OPS), which recently moved facilities to increase production of it lead product, Optowire 2.
“The facility move is now complete and we expect Opsens to add 1–2 new production lines in calendar Q3,” says the analyst. “This should increase total production volume to 600–800 Optowire II units per week, a 50–100% increase over Q2. As such, we expect record quarterly sales as market demand continues to outpace supply.”
Lam has a “Buy” rating and a one-year price target of $2.15 on Opsens, which closed Wednesday at $1.49.
Analyst Daniel Kim likes next-gen antenna solutions provider Baylin Technologies (TSX:BYL), which he believes is undervalued compared to its comparables.
“BYL trades at one-quarter the EV/Sales of its peers despite demonstrating solid consistent results: growing revenue; controlling costs; and driving new opportunities,” Kim says. “Mobile is enjoying higher volumes as it is a Tier 1 supplier to market sharegaining Samsung (Galaxy S7 is enjoying an atypical selling surge post-release) while diversifying risk with three other OEMs whose volumes have exceeded expectations.”
Kim has a “Buy” rating and a one-year price target of $5.00 on Baylin, which closed Wednesday at $2.06.
Kim’s other top pick is Vancouver-based M2M player Sierra Wireless (TSX:SW, Nasdaq:SWIR). The analyst believes the company has a real growth opportunity in the auto sector.
“Software-related vehicle recalls is a massive and growing problem and SWIR is an industry leader, providing solutions to auto OEMs to mitigate these recalls,” says Kim. “Tesla stands at the forefront of what other auto OEMs can do and they are rapidly adopting this industry leader’s model, not only to help reduce the cost of recalls (we estimate $6 billion), but also the brand damaging impact of “recalls”, and equally important, the big data captured by vehicular telematics.”
Kim has a “Buy” rating and a one-year price target of (U.S.) $23.00 on Sierra Wireless, which closed Wednesday at $16.37.