After a sluggish finish to 2017, Echelon Wealth Partners analyst Rob Goff thinks D-Box Technologies (TSX:DBO) will enjoy a sparkling 2018.
In a research report to clients Monday, Goff confirmed D-Box, a company that designs and manufactures motion systems for the entertainment and industrial markets, within the firm’s “Top Picks” portfolio, a list of stocks he says is comprised of aggressive, catalyst rich portfolio of high growth, entrepreneurial companies.
“We are confirming D-BOX Technologies within our Top Picks portfolio, following its addition for Q417 noting the loss of 15.49% over that quarter,” the analyst said. “Our bullish thesis builds on the demand stimulus about theatres upgrading the customer experience to strengthen attendance and importantly drive per patron seat yields at a time, where box office attendance has been both more volatile and under pressure. We see D-BOX as an exceptionally attractive, catalyst-rich addition to our Top Picks portfolio. Our bullish outlook considers product and geographic expansion as potentially significant catalysts to achieving results significantly above our baseline forecasts.”
Goff says he looks forward to positive feedback from the Star Wars release and expects theatre distributors to announce budget upgrades in 2018, a move that should mean demand for D-Box solutions.
Goff currently has a “Speculative Buy” rating and one-year price target of $0.90 on D-Box, implying a return of 185.7 per cent at the time of publication.
Goff thinks D-Box will generate EBITDA of $1.6-million on revenue of $35.6-million in fiscal 2018. He expects those numbers will improve to EBITDA of $4.6-million on a topline of $50.5-million the following year.
The analyst says his overriding thesis about D-Box is unchanged.
“We believe D-BOX is exceptionally well positioned to benefit from the current wave of theatres upgrading to recliners as they move to maximize revenue per patron and increase utilization,” Goff says. “The D-BOX motion control system has been adapted to incorporate recliners, with recent contract wins representing what we see as a new wave of theatre adoption. We believe the ability to incorporate recliners from the leading manufacturers is a significant step forward to gaining broader and deeper North American traction. We could see the new motion controlled recliners take the place of existing D-BOX chairs that are then repurposed to lower traffic screens in the same theatre or alternative theatres.”