BSM Technologies has a big upside, Paradigm Capital says

BSM Technologies (BSM Technologies Stock Quote, Chart, News: TSX:GPS) may have missed its revenue goals for fiscal Q1 but the company’s higher-than-expected subscription rate has Paradigm Capital’s Daniel Kim maintaining his “Buy” rating, with a 12-month target price of $2.00.

Last week, Toronto-based BSM released its financial and operational results for the three months ending December 31, 2017, with total revenue of $14.9 million, down 19 per cent from the same quarter last year, and EBITDA of $1.4 million, down 50 per cent year over year. (That compares to a street estimate on revenue/EBITDA of $18.4 million/$2.8 million.)

Attributed to poorer sales in hardware and professional services, the topline drop for the GPS fleet tracking company has been chalked up to volatility in hardware sales and quarter-to-quarter variability, the company comes across as strong based on an uptick in customer subscription add-ons, according to Kim, who says that BSM’s M&A activity in recent years has served it well.

“BSM represents a compelling way to get exposure to the telematics space within several verticals where adoption remains low,” says the analyst. “The mergers with Webtech and Mobi are highly strategic, providing further scale, new verticals and distribution.”

“The integration of Mobi will provide value-added services and products, giving BSM an opportunity to increase ARPU,” says the analyst. “Going forward, the company’s objective remains to deliver sustained 10% recurring revenue, increase subscription growth and drive customer engagement.”

BSM experienced a record quarter for new subscriptions, adding on 7,000 against a churn of 2,600 for a total subscription number of 166,100.

Kim maintains his “Buy” recommendation for BSM with a 12-month target price of $2.00, representing a 60 per cent rate of return.

More Cantech Analysts