Beacon Securities analyst Gabriel Leung says Firan Technology Group (Firan Technology Group Stock Quote, Chart TSX:FTG) delivered quarterly results that were a little light on revenue but indicated that healthier profit margins are likely to continue going forward.
As a result, FTG got a target price bump from Leung in a client update delivered on Thursday in which the analyst reiterated his “Buy” rating on the stock.
Aerospace and defense electronics company Firan reported its fiscal first quarter on Wednesday, generating revenue and EBITDA of $25.4 million and $3.3 million, respectively. The top line was lower than Leung’s $29.3 million estimate but the EBITDA was in-line with the analyst’s own $3.3 million.
Leung points out that the company’s Q1 revenues were impacted negatively by continued material shortages and certain regulatory certification processes but that the company says that these are not expected to impact the remaining quarters of 2019.
With the EBITDA in-line, Leung figures better-than-expected gross margins at 26.6 per cent over Q1, which he says should improve in Q2.
“Overall, we are very pleased with the strong margin improvement, which we expect to continue as revenues scale. We are increasing our target to $5.50 (was $5.00), which is based on 9x FY19 EV/EBITDA,” says Leung.
The analyst says that he will include in his estimates contributions from the previously announced acquisition of a US-based circuit board manufacturing company once the deal closes. Until then, his estimates are revenue and EBITDA for fiscal 2019 of $111.6 million and $15.4 million, respectively.
Leung’s $5.50 target represents a projected return of 68 per cent at the time of publication.