Echelon Wealth Partners analyst Rob Goff thinks there is a whole lot of money to be made on D-Box Technologies (TSX:DBO).
In a research report to clients Wednesday, Goff confirmed his Top Pick status on the stock, which he regards as a “Speculative Buy”. The analyst has a one-year price target of $0.80 on D-Box, implying a return of 248 per cent at the time of publication.
Goff says D-Box, which designs and manufactures motion systems for the entertainment and industrial markets worldwide, says investors can look forward to numerous potential catalysts.
“We see D-BOX as an exceptionally attractive, catalyst-rich member of our Top Picks Portfolio,” the analyst says. “Our bullish outlook considers product and geographic expansion as potentially significant catalysts to achieving results significantly above our baseline forecasts. We are optimistic that the recent success of both Star Wars and Black Panther will provide a catalyst for incremental theatre wins (deployments/pilots) as we enter what is expected to be a strong CQ218 box office lineup. We look for additional VR deployments in both theatres and high traffic experiences such as the NFL Experience at Times Square, where Cirque du Soleil was the creator. We saw the company’s involvement with Cirque de Soleil’s Times Square deployment of an NFL showcase as both foreshadowing of expansion in concert with VR deployments and as an attractive branding opportunity for D-BOX, which has not yet penetrated the NY market.”
Goff thinks D-Box will generate Adjusted EBITDA of $1.5-million on revenue of $35.1-million in fiscal 2018. He expects thoe numbers will improve to EBITDA of $2.6-million on a topline of $39.1-million the following year.
Goff says the wind is at the company’s back, with D-Box firmly positioned in a growing high-end segment of the market.
“We remain bullish on C2018, as reports of recliner economics from the US exhibitors continue to exceed expectations,” he says. As we have previously noted, outstanding figures on recliners are supported by data points from peers Regal and AMC. As noted on its Q117 conference call, Regal has seen attendance in recliner theatres increase 13.5%, ticket prices increase 5.5%, CPP increase ~6.0%, and theatre-level CFs increase ~52.0%, which has contributed to an estimated ~$77M of incremental EBITDA from its ~$140M investment to date in reclining seats. Meanwhile, AMC has seen admissions revenues up 5.1% in recliner-equipped theatres in Q217, while non-recliner theatres were down 8.3%. Since recliner renovations began for AMC in C2011, attendance growth has risen, on average 57%, and operating CF is up 225%. And looking at only those theatres, which have been renovated within the last three years – i.e., once the lowest-hanging fruit had been theoretically picked – attendance has still grown 33% and operating CFs have grown 157%. All of this is to say that the trend towards recliners should persist in C2018 and beyond, as it is proving lucrative for theatre operators. As D-BOX’s reclining motion seats gain traction, we look for the Company to be able to ride this wave. We find that the much discussed greater reliance on mega hits at the box office dovetails with D-BOX’s premium experience for patrons.”