Firan Technology Group gets new $6.00 price target at Beacon

Following second quarter results that bested his expectations, Beacon Securities analyst Gabriel Leung has raised his price target on Firan Technology Group (Firan Technology Group News, Stock Quote, Chart TSX:FTG).

On July 10, Firan reported its Q2, 2019 results. The company posted EBITDA of $5.2-million on sales of $32.2-million, a topline that was up 12 per cent over the same period a year prior.

“The second quarter of 2019 was a great quarter for FTG with record sales, EBITDA and operating profit. There was strong performance across the corporation showing the strategic initiatives from previous years, including the acquisitions in 2016 to drive up utilization and the investments in China, which have created value for the corporation,” CEO Brad Bourne said. “We are excited about our pending acquisition, which will add much needed capacity for standard circuit board manufacturing, freeing up capacity in existing sites for higher-end product, and expand our offering for the U.S. defence market.”

Leung notes that the company beat his expectations on both the top and bottom line. He broke down how Q3 might shape up.

“Recall that the company had previously noted that it had entered Q2 with $48M in backlog of which $30M was deliverable,” the analyst notes. “However, based on the MD&A, it appears there was also a catch up shipment from Chatsworth Circuits, which was held up in an earlier regulatory certification issue, which also helped to drive the revenue outperformance. Furthermore, within Aerospace Chatsworth, revenue growth was depressed in H1 FY19 due to material shortages, predominately with respect to connectors. This issue continues into fiscal Q3, however, its impact has been reduced thanks to actions initiated by management. Backlog currently stands at $43.7M ($23.4M in Circuits and $20.4M in Aerospace) of which $30M is deliverable in Q3. We expect reported Q3 revenues to be slightly below $30M given about a week of downtime due to summer vacations.”

In a research update to clients Thursday, Leung maintained his “Buy” rating but raised his one-year price target on FTG from $5.50 to $6.00, implying a return of 58 per cent at the time of publication.

Leung thinks Firan Technology Group will post EBITDA of $17.1-million on revenue of $115.9-million in fiscal 2019.

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