Baylin Technologies is undervalued, Paradigm Capital says

Ahead of the company’s first quarter results, Paradigm Capital‘s Daniel Kim is pulling back the reigns slightly on his revenue estimates for Baylin Technologies (Baylin Technologies Stock Quote, Chart, News: TSX:BYL) , though the analyst is maintaining his “Buy” rating and $5.00 price target on the stock.

On May 7, Baylin will report its Q1, 2018 results. Kim expects the company will generate EBITDA of $2.0-million on revenue of $31.0-million.

Kim explains that he has trimmed his revenue expectations to reflects disruptions from the recent acquisition of Advantech Wireless, higher costs associated with recent hires, and from the slightly lower mobile revenue indicated in Samsung’s recent quarterly results.

“Baylin could see a dampening in margins this quarter as disruption from the acquisition impacts both revenue and opex,” Kim says. “We have trimmed our numbers slightly for the quarter and the balance of this year to reflect its higher cost profile. We continue to believe this acquisition is a great complement to BYL’s current product suite and will help drive topand bottom-line growth. The company has also bolstered its sales team with significant hires with deep industry experience, which clearly bodes well for future growth. We have introduced FY19 estimates and apply our same 10x EV/EBITDA multiple to our $20.8M EBITDA arrive at our $5.00 target (due to rounding).”

Kim’s $5.00 one-year price target on Baylin implied a return of 53 per cent at the time of publication.

The Paradigm Capital analyst thinks Baylin will generate EBITDA of $14.2-million on revenue of $134.7-million in fiscal 2018. He expects those numbers will improve to EBITDA of $20.8-million on a topline of $150.6-million the following year.