Haywood analyst Pardeep Sangha reveals top picks for Q2

His top two picks for Q1 returned 103 per cent and 12 per cent respectively, so it’s fair to say that many eyes will be on Haywood Securities analyst Pardeep Sangha’s top picks for the second quarter. The analyst today revealed that those picks are Nanotech Security Corp. (TSXV:NTS) and Espial Group (TSX:ESP).

Espial, the stock that returned 12 per cent in Q1 is a holdover. Nanotech, which Sangha launched coverage of recently, replaces AcuityAds (TSXV:AT), which returned a whopping 103 per cent in the first quarter of 2017 alone.

Of the eleven companies Sangha currently covers, eight showed positive returns in the first quarter, including Apivio (TSXV:APV), which was up 43 per cent, Avigilon (TSX:AVO), which was up 20 per cent, VersaPay (TSXV:VPY), which returned 17 per cent, and Tio Networks, which boasted a 16 per cent return.

Sangha says Vancouver-based Nanotech has a large market opportunity and multiple catalysts.

“We like Nanotech because the Company has developed disruptive technology that we believe will result in very lucrative, high-margin, long-term contracts for the Company in the banknote industry,” he says.

Sangha currently has a “Buy” rating and a one-year price target of $2.00 on Nanotech, which closed Monday at $1.26. The analyst thinks the company will generate EBITDA of zero on revenue of $10.5-million in fiscal 2017. He expects these numbers will improve to EBITDA of $4.6-million on a topline of $21.5-million the following year and then to EBITDA of $14.9-million on revenue of $41.0-million in fiscal 2018.

Sangha says Espial could be on the cusp of some big things.

“We picked Espial as our other Q1 top pick because the Company just launched its video service with Tele Columbus,” he notes. “Espial has a strong pipeline of opportunities which could close in Q2CY17 and we believe Espial is significantly undervalued. In addition, we believe successful roll-outs at Tele Columbus and NOS (Portugal) will lead to additional contract wins for Espial. Management is expecting decisions from several operators over the next six months, which represents potentially 5M additional new subscribers for Espial.

Sangha currently has a “Buy” rating and a one-year price target of $4.25 on Espial Group, which closed Monday at $2.44.

Sangha thinks Espial will post Adjusted EBITDA of $1.0-million on revenue of $41.7-million in fiscal 2017. He expects these numbers will improve to EBITDA of $8.5-million on a topline of $55-million the following year.