Haywood analyst Pardeep Sangha regards today’s announcement from Apivio Systems (TSXV:APV) as more proof that the company is undervalued.
This morning, Apivio announced it had signed a global distribution agreement with Japan’s NEC Corp. The arrangement will see NEC distribute Apivio’s Android-based desk phones globally. Apivio says it expects to begin shipping phones by mid-2017.
“We are excited to expand our global relationship directly with NEC Corp.,” says Apivio CEO Rob Bakshi. “NEC continues to show leadership in pursuit of changing traditional enterprise desk telephones to intelligent and value-added software driven enterprise solutions. For Apivio, this is a fantastic development that elevates our partnership with NEC from a regional to a global technology initiative that further validates our corporate vision for where unified communications technology is heading.”
Sangha says this deal clarifies the future for Apivio, and the analyst thinks it’s a bright one.
“We believe this agreement with NEC Corporate (Japan) is a game changer for Apivio,” says the analyst. “We believe Apivio is now clearly on the path to becoming a $100M revenue company with $10M in annual EBITDA. This is an immense achievement for Apivio as NEC is one of the largest VoIP equipment vendors in the world. Management has previously forecasted that a global distribution agreement with NEC could result in over 200,000 annual unit sales in the future, representing a revenue opportunity that we estimate to be greater than $30M annually (based on an ASP of $150/phone to Apivio).
In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $1.00 on Apivio Systems, implying a return of 270.4 per cent at the time of publication. The analyst explains that he didn’t make any changes to his forecast, as his models already assumed an NEC revenue ramp starting in 2017.
Sangha believes Apivio will generate Adjusted EBITDA of $3.2-million on revenue of $66-million in fiscal 2017. He expects these numbers will improve to EBITDA of $4.5-million on a topline of $77.2-million the following year.
Disclosure: Cantech Letter editor Nick Waddell owns shares of Apivio and the company is an annual sponsor of the site.