Nanotech Security Corp. is a buy, Haywood says

Ahead of the company’s fourth quarter results, Haywood analyst Pardeep Sangha thinks investors should be looking at Nanotech Security (TSXV:NTS).

On Thursday, Nanotech will report its fourth quarter and fiscal 2017 results. Sangha thinks the company will generate EBITDA of $500,000 on revenue of $3.2-million, a topline that would be up 113.3 per cent over the $1.5-million in revenue the company posted in the same period last year.

The analyst says he will be on the company’s conference call, listening for progress on its unnamed large Asian customer, an announcement on the tax stamp opportunity in India, whether or not management reiterates its 2018 guidance, and progress on the $30-million development contract.

Sangha says a recent slide in shares of Nanotech is an opportunity.

“Nanotech’s share price has declined 13% this month (Nov. 30 closing price of $1.60) as the markets have been expecting announcements regarding the large Asian customer and the tax stamp opportunity, both of which have not happened yet,” the analyst notes. “Nanotech is currently trading at 5.9x EV/Revenue of our CY17 estimates, which is above its industry peer group average of 4.2x EV/Revenue of consensus CY17 estimates. Our target price is based on applying a 6.0x EV/Revenue multiple and a 22.0x EV/EBITDA multiple to our CY18 forecast.

In a resarch update to clients today, Sangha reiterated his “Buy” rating and one-year price target of $2.25 on Nanotech, implying a return of 61.9 per cent at the time of publication.

Sangha thinks Nanotech will generate EBITDA of $100,000 on revenue of $8.8-million in fiscal 2017. He expects those numbers will improve to EBITDA of $5.0-million on a topline of $20.1-million the following year.