BSM Technologies has a 154 per cent upside, Laurentian says

Ahead of the company’s fourth quarter results, Laurentian Bank Securities analyst Nick Agostino thinks there is big upside in BSM Technologies (BSM Technologies Stock Quote, Chart TSX:GPS).

On December 19, BSM will report its Q4 and fiscal 2018 results. Agostino expects the company will post Adjusted EBITDA of $1.21-million on revenue of $15.1-million, a topline that would be down 3.8 per cent over the same period last year.

The analyst says he looks for recurring revenue to offset softer hardware numbers from BSM.

Noting the current Hardware run-rate fiscal YTD and a lack of meaningful rollout announcements in FQ3, we take a conservative view on YoY Hardware sales, modeling $2.8M (down 32% YoY) on a shipment forecast of 3.8k and relatively flat ASPs. Offsetting this slightly, we model 4% growth in Recurring revenue off of Q4/F17 lows (up 3% in 1H/F18), aided by Mobi deployments, with 1.9k net sub adds for the quarter and flat YoY ARPU at $22.85 (up 2% QoQ following churn from a low ARPU contributor in FQ3),” Agostino says. Finally we model 60% YoY growth in Services revenues, with the quarter benefitting from a 1k unit deployment in FQ4. Overall, we look for sales of $15.1M, just below consensus, on an est. 2% YoY organic growth decline on a conservative Hardware sales forecast. We est. FQ4 ending net debt of >$1M (incl. contingent consideration) and $1.2M in CFO (ex. w/c).”

In a research update to clients today, Agostino maintained his “Buy” rating and one-year price target of $1.75 on BSM Technologies, implying a return of 153.6 per cent at the time of publication.

The analyst thinks GPS will post EBITDA of $5.8-million on revenue of $60.6-million in fiscal 2018. He expects those numbers will improve to EBITDA of $11.2-million on a topline of $66.0-million the following year.

“(The) stock trades at 6.2x our NTM EV/EBITDA vs. hardware vendors at 14.5x, telematics comps at 12.3x and SaaS/software comps at 12.2x (excl. outliers),” Agostino adds. “GPS’s multiple has seen a 9 turn multiple compression post the announced departure of its CEO and in the wake of current market volatility.”