The rollout of a 4K hybrid IP video service will client Tele Columbus is one of several imminent milestones for Ottawa-based provider of digital TV and IPTV software company Espial Group (TSX:ESP), says Haywood Securities analyst Pardeep Sangha.
This morning, Espial announced that its client Tele Columbus will in January launch advanceTV, a next-generation, 4k, hybrid IP video service next January. Tele Columbus is Germany’s third largest cable network operator, with approximately 3.6-million subscribers.
“To continue on their exceptional growth path, Tele Columbus wanted to set a milestone in the market to deploy a state-of-the-art video service that delivers premium value to their subscribers,” said Espial CEO Jaison Dolvane. “The Espial Elite services team collaborated with Tele Columbus’ technology group to create advanceTV, which is powered by Espial’s client and cloud-based solutions.”
Sangha, who today maintained his “Buy” rating and one-year price target of $3.75 on Espial, says today’s development, the second large operator win after Portugal’s NOS, is one of several on the horizon. The analyst says it will have a significant economic impact.
“We estimate the revenue opportunity with Tele Columbus to be over $35M over the next 4 years, based on $10/subscriber initial fee and an additional $1.50/year per subscriber in recurring support and maintenance,” says the analyst.
Sangha explained the reasoning behind maintaining his price target.
“We view today’s news as being very positive in nature, but we maintained our 12-month target price of $3.75 as the roll-out schedule at Tele Columbus is still unknown and the timing of this launch is in line with our expectations.”
Sangha believes Espial will post negative EBITDA of $6.9-million on revenue of $24.1-million in fiscal 2016. He expects these numbers will improve to positive EBITDA of $200K on a topline of $41.8-million the following year.