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Wi-LAN will deliver more upside surprises, says Paradigm Capital

Wi-LAN
Wi-LAN
Wi-LAN CEO Jim Skippen in Toronto November 17, 2015.

A better than expected fourth quarter likely won’t be the end of the positive surprises from Wi-LAN (Wi-LAN Stock Quote, Chart, News: TSX:WIN, Nasdaq:WILN) says Paradigm Capital analyst Daniel Kim.

Yesterday, Wi-LAN reported its fourth quarter and fiscal 2016 results. In the fourth quarter, the Ottawa-based company generated EBITDA of $17.5-million on revenue of $30.2-million, a topline that was up 15.8 per cent over the same period last year.

“Two thousand sixteen ended on a positive note with a strong quarter for revenue, EBITDA and cash flow,” said CEO Jim Skippen. “During the year we added several exciting patent portfolios to our already substantial and valuable holdings, reflecting investment in our future. We also grew our pipeline of licence opportunities by launching a number of negotiations and litigations with potential licensees in both our traditional U.S. market as well as in other geographies such as China, Germany and Canada. Looking forward, we will remain patient in our licence negotiations in order to obtain what we believe is fair value for our patents. This may lead to variability in our quarterly financial performance; however, we believe that it is absolutely in the best long-term interest of the business to protect the value of those patents. While financial performance has been lumpy in the past five quarters, in three of those quarters we have generated positive revenue surprises.”

Kim says the quarter easily bested his expectations, which were in-line with the street. He had modeled EBITDA of $10.7-million on revenue of $19.8-million. He says a concern heading into the quarter was the low volume of signed licenses, but says this was offset by the higher dollar values of each license. The analyst thinks this isn’t the end of the good news for the firm.

“We believe more positive surprises are in the works,” says Kim. “Several large potential licenses (Deutsche Telecom, Amazon and Sony) are imminent, any one of which should serve as meaningful catalysts for the stock. WIN is currently trading at sub-intrinsic value levels, at 4.8x 2017e P/E versus peers at 15.5x.”

In a research update to clients today, Kim maintained his “Buy” rating and one-year price target of $4.50 on Wi-LAN, implying a return of 104 per cent at the time of publication, including dividend.

Kim believes Wi-LAN will post EBITDA of $37.3-million on revenue of $75.2-million in fiscal 2017.

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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