BSM Technologies is still a cheap stock: Laurentian

Following the company’s first quarter results, Laurentian Bank Securities analyst Nick Agostino remains bullish on BSM Technologies (BSM Technologies Stock Quote, Chart TSX:GPS).

On Tuesday, BSM reported its Q1, 2019 results. The company lost $85,000 on revenue of $15.7-million, a topline that was up two per cent over the same time last year.

“We are pleased to begin fiscal 2019 with a significant improvement in our subscriber growth metrics,” CEO Louis De Jong said. “Moving forward in the year, we are focused on increasing sales momentum following the January launch of BSM illuminate, our analytics software platform designed to enable data-driven operational decision-making. We are encouraged by the feedback we have received following the introduction of BSM illuminate and are confident in its future success.”

Agostino says the quarter bested his Q1 sales estimate of $13.9-million and EBITDA of $1.6-million was also better than his estimate of $1.1-million. The analyst says the drop in churn and strong subscription rates were positives.

“Adjusting for IFRS15, consolidated revenue and Adj. EBITDA were in line with consensus and slightly above our estimates,” Agostino notes. “The delta to our estimates, being Hardware driven, is less meaningful than a Recurring driven beat, particularly given GPS’s transition to its illuminate platform (customer migrations underway) targeting a mix shift toward subscription sales. Nevertheless, Hardware’s lumpiness will decline significantly under IFRS15, with revenue recognized over contract length (~4 years) vs. prior recognition at the time of shipment, driving more consistency and predictability across the business. While the quarter was in line from a financial perspective, we highlight the reduced churn (revisiting a 4-year low), strong sub adds and early customer feedback on illuminate as positive indicators. During GPS’s transition to this platform, we will look to ARPU, churn and sub adds as our primary metrics in terms of measuring the company’s new strategic direction (announced with Q4/F18 results).”

In a research update to clients today, Agostino maintained his “Buy” rating and one-year price target of $1.30 on BSM Technologies, implying a return of 56.6 per cent at the time of publication.

Agostino thinks BSM will post EBITDA of 5.8-million on revenue of $60.5-million in fiscal 2019. In fiscal 2020, the analyst thinks those numbers will grow to EBITDA of $9.1-million on a topline of $65.1-million.