BSM Technologies has 29% upside, says Laurentian

A quarter that was a little better than he expected has provided Laurentian Bank Securities analyst Nick Agostino with more evidence that BSM Technologies (BSM Technologies Stock Quote, Chart, News: TSX:GPS) still has upside.

On December 14, BSM reported its fourth quarter and fiscal 2016 results. In the fourth quarter, the company posted Adjusted EBITDA of $2.0-million on $14.96-million in revenue, a topline that was 100 per cent better than the same period last year.

“Improving organic growth drove strong financial results in the fourth quarter of our fiscal 2016,” said CEO Aly Rahemtulla. “Notably, this quarter, we saw improved gross subscriber additions with lower subscriber churn. While the decrease in subscriber churn this quarter is encouraging, and suggests our increased effort in improving customer satisfaction and retention is beginning to yield results, we expect continued quarter-to-quarter variability as we work to manage controllable subscriber churn in 2017 and beyond.”

Agostino says the quarter didn’t play out exactly as he would have liked, but he sees progress nonetheless.

“While we would have preferred a recurring revenue-driven sales beat, the impressive hardware sales (while lumpy from quarter to quarter) implies a growing subscriber base near-term as units to new subs are installed,” he says. “We note 65-70% of hardware sales were to net new customers; these include a roll-out with a recent new Class 1 win, shipments to GPS’s past GSA award from the U.S. government, and broad rollouts to a recent large construction win (with potential to become GPS’s largest customer). Further shipments are expected to these groups in 1H/F17. Services revenue strength came from a large win (closed FQ4), while Mobi sales will contribute starting in Q1/F17. GPS is in the process of assessing earn-out upside from the Mobi acquisition post the two-month anniversary closing (November 2016). We estimate current net cash of $5.0M post Mobi closing.”

In a research update to clients today, Agostino maintained his “Buy” rating and one-year price target of $1.75 on BSM Technologies, implying a return of 28.7 per cent.

Agostino believes BSM will post Adjusted EBITDA of $10.76-million on a topline of $70.28-million in fiscal 2017.