BSM Technologies is a buy ahead of Q2 results: Laurentian

Ahead of the company’s second quarter results, Laurentian Bank Securities analyst Nick Agostino thinks investors should be buying BSM Technologies (BSM Technologies Stock Quote, Chart, News: TSX:GPS).

On Thursday, after market close, BSM will report its Q2, 2018 results. The analyst expects the company will post Adjusted EBITDA of $1.55-million on revenue of $15.89-million, a topline estimate that comes in just slightly below the street consensus.

Agostino says the last quarter left him a little gun shy and adds that he will be watching closely for commentary from management on its pipeline, particularly in the rail and government verticals.

“We remain conservative on FQ2 given the FQ1 top line miss,” the analyst says. “We model -3% YoY growth for Recurring revenue given a reduction in the quarterly run-rate due to subscriber losses from 2G network shutdowns in the U.S. in Q2/F17; but up 2% QoQ following 4.4k net sub adds in FQ1. We look for flat YoY ARPU (but up QoQ) to $23.85 on maintenance contract contributions partly offsetting F/X headwinds. We model relatively flat YoY Hardware revenues based on a flat unit shipment forecast (4.7k) and flat ASPs, and an uptick in Services implementation revenues from increased activity. We estimate FQ2 ending net debt of $4.5M (incl. contingent consideration) and $1.4M in CFO (excl. w/c).”

The analyst today maintained his “Buy” rating and one-year price target of $1.75 on BSM, implying a return of 36.7 per cent at the time of publication.

Agostino thinks BSM Technologies will generate EBITDA of $6.2-million on revenue of $63.2-million in fiscal 2018. He thinks those numbers will improve to EBITDA of $12.0-million on a topline of $69.6-million the following year.

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