Clarus raises price target on Urthecast to $7.00

A potentially significant new deal has Clarus Securities analyst Noel Atkinson raising his price target on Urthecast (TSX:UR).

Yesterday, Urthecast announced it had struck a deal with Land O’Lakes subsidiary Geosys to supply geospatial data from its UrtheDaily constellation, UrtheCast’s planned constellation of Earth-observation satellites which the company says will deliver daily, medium-resolution imagery of the entire planet’s land mass. Terms of the agreement were not supplied.

“We are honoured to announce Geosys as the UrtheDaily anchor customer for agriculture,” said Urthecast CEO Wade Larson. “The selection of UrtheDaily by Geosys, a pioneer in digital agriculture, validates our belief that UrtheDaily is the remote-sensing constellation of choice for the sophisticated geoanalytics market. We at UrtheCast are extremely pleased to partner with an organization that shares many of our core values and ambitions as we look to jointly harness the capabilities of UrtheDaily to tackle some of the world’s most pressing issues.”

Atkinson says this development crystallizes the idea of UrtheDaily.

“This is an exciting achievement for UrtheCast,” says the analyst. “The Land O’Lakes announcement should help bring the rest of the initial contract portfolio to fruition. Management believes that the UrtheDaily business could ultimately generate over $100MM in annual revenue at what we expect could be an EBITDA contribution margin approaching 50%. We do not expect any revenue during the UrtheDaily “build phase” so we are not changing our estimates at this time. However, the impressive traction that UrtheCast now has with its new constellations leads us to add UrtheDaily to our sum-ofthe-parts target valuation and adjust how we value the pending OptiSAR constellation.”

In a research update to clients today, Atkinson maintained his “Buy” rating, but raised his one-year price target on Urthecast from $4.75 to $7.00. Shares of Urthecast closed today up 2.7 per cent to $1.93.

Atkinson believes Urthecast will post EBITDA of $6.3-million on revenue of $79-million in fiscal 2016. He expects these numbers will improve to EBITDA of $26.7-million on a topline of $91.2-million the following year