Nanotech Security has 47% upside, Haywood says

On Thursday, Nanotech will report its Q3, 2018 results. Sangha expects the company will post Adjusted EBITDA of $300,000 on revenue of $2.4-million, below the street consensus of $700,000 in EBITDA on a topline of $3.0-million.

Sangha says despite the fact that NTS is still waiting on bringing its big Asian customer into production, he believes the company deserves the premium it currently trades at.

“Nanotech’s share price has declined 26% this year as markets were expecting the large Asian customer to be in production by now,” the analyst says. “Nanotech is currently trading at 4.7x EV/Revenue of our CY18 estimates, which is above its industry peer group average of 2.5x EV/Revenue of consensus CY18 estimates. We believe the premium is justified given the high growth and long-term profitability profile. Our target price reflects a 3.8x EV/Revenue multiple and a 10.9x EV/EBITDA multiple to our FY19 forecast.”

In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $1.60 on Nanotech Security, implying a return of 46.8 per cent at the time of publication.

Sangha thinks NTS will generate Adjusted EBITDA of $2.3-million on revenue of $11.0-million in fiscal 2018. He expects those numbers will improve to EBITDA of $8.8-million on a topline of $25.0-million the following year.