Sangoma Technologies is a double, Beacon Securities says

A better than expected first quarter has Beacon Securities analyst Gabriel Leung feeling bullish about Sangoma Technologies (Sangoma Technologies Stock Quote, Chart, News: TSXV:STC).

On Thursday, Sangoma reported its Q1, 2018 results. The company earned $390,000 on revenue of $11.85-million, a topline that was up 104 per cent over the same period last year.

“Our first quarter results provide a very good start to the year,” said CEO Bill Wignall. “Revenue was strong, augmented by a large one-time order that will not recur next quarter, which helped offset the significant revenue impact of a substantially weakened U.S. dollar and the seasonality exhibited in prior years. It is especially gratifying to see our quarterly EBITDA above $1-million for the first time. I’m also really pleased with the positive contribution, as anticipated, from the VoIP Supply acquisition completed early in the quarter. I’d like to extend a warm welcome to that great group of talented people in Buffalo, who are now part of the growing Sangoma family.”

Leung says that large order was a positive but notes that the company probably would have had a very good quarter without it.

“If we assume the large order was ~10% of revenues and exclude ~$3.75M for VoIP Supply (based on the company’s expected annual contribution of ~$15M), then we estimate organic revenue growth was ~20% y/y, which we view as being positive particularly given the strong forex headwinds in the quarter,” the analyst says.

In a research update to clients today, Leung maintained his “Buy” rating and one-year price target of $1.55 on Sangoma Technologies, implying a return of 99 per cent at the time of publication.

Leung thinks Sangoma will generate EBITDA of $3.9-million on revenue of $46.6-million in fiscal 2018. He expects those numbers will improve to EBITDA of $5.6-million on a topline of $51.5-million the following year.