Tucows is fully valued, Echelon Wealth says

A possible acquisition revealed in a recent filing isn’t moving the needle on Tucows (Tucows Stock Quote, Chart, News: TSX:TC) for Echelon Wealth Partners analyst Ralph Garcea.

Garcea notes that in a recent 8K filing Tucows released information regarding its bid to acquire all the assets of city-owned Burlington Telecom for $28.8-million. While the analyst says there is a possibility this deal might go through, he doesn’t count it as enough to change his view that Tucows is fully valued.

“Burlington Telecom indicated that on October 2 it will narrow the field to two bidders and announce the winner on October 16,” he notes. “We suspect TC will have no issue getting to the final two. It has been revealed in recent media publications that the final three bidders in the running are Ting (Tucows), Schurz Communications, and Keep Burlington Telecom Local (KBTL) — Ting is offering $28.8M, Schurz is offering $30.8M, and KBTL is offering $12M. The city of Burlington, Vt, is required to sell Burlington Telecom as part of a settlement with Citibank and a local investor. During the former city Mayor’s administration, $17M of taxpayer money was used to keep the Company afloat. We would view this possible acquisition as accretive in the medium term, as it would immediately add another Ting Town for the fiber business. While there are no subscriber statistics, the 2016 Census population estimate of Burlington, Vt, is 42,260.”

In a research update to clients Friday, Garcea maintained his “Hold” rating and one-year price target of (U.S.) $58.50 (C $80.00 on Tucows, implying a return of nine per cent at the time of publication.

Garcea thinks Tucows will post Adjusted EBITDA of $38.6-million on revenue of $328.1-million in fiscal 2017. He expects those numbers will improve to EBITDA of $56.7-million on a topline of $359.3-million the following year.