Hang in there with Espial, PI Financial says

Investor patience will be rewarded on the “range bound” Espial (Espial Stock Quote, Chart, News: TSX:ESP) says PI Financial analyst David Kwan.

On Tuesday, Espial reported its Q2, 2017 results. The company lost $3.8-million on revenue of $7.8-million, a topline that was up 72 per cent over the same period last year.

“In Q2, revenues increased 72 per cent over the same quarter last year,” said CEO Jaison Dolvane. “We saw good momentum with current customers like WOW and Tele2 who enhanced their services with features like Netflix and premium user experiences. We also expect to see our other customers, including NOS and Tele Columbus, continue to deliver new capabilities and improvements to drive further subscriber expansion. In Q2, we signed a SaaS agreement for our cloud-based Elevate IPTV platform, and continued to invest in our cloud and device products. As we look to the second half of the year, we anticipate continued subscriber growth, while we focus on achieving new wins and growing our SaaS revenues. Our Q2 achievements and product investments are important milestones to strengthen our pipeline and position us well in this quickly evolving market.”

Kwan says Espial is a waiting game right now, but investors should be comforted by solid fundamentals.

“The stock continues to remain range bound, with its pristine cashed up balance sheet and discount valuation (bottom end of the peer group) providing solid downside support but a lack o material news flow/caalysts (eg,. Tier one customer wins) and financial/operational momentum is holding the stock back,” the analyst says. While the (competitive) risk profile continues to increase by the day, we believe the risk/reward still remains favourable and are optimistic that the recent board changes are the first of hopefully many positive things to come.”

In a research update to clients today, Kwan maintained his “Buy” rating and one-year price target of $2.85 on Espial Group.

Kwan believes Espial will post Adjusted EBITDA of negative $2.5-million on revenue of $35.5-million in fiscal 2017. He expects those numbers will improve to EBITDA of positive $7.9-million on a topline of $49.8-million the following year.

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