Sangoma Technologies is poised for more growth, says PI

More acquisitions could be on the horizon for unified communications company Sangoma Technologies (Sangoma Technologies News, Stock Quote, Chart TSXV:STC), says PI Financial’s David Kwan, who in a corporate update on Tuesday reiterated his “Buy” rating and $2.60 target, representing a projected return of 62.5 per cent at the time of publication.

Sangoma closed on its previously announced equity offering on Tuesday, raising $23.0 million in gross proceeds through the sale of about 14.85 million shares at $1.55 per share.

The company is expected to use the proceeds to fund future acquisitions, debt reduction and general corporate purposes.

Kwan notes that the financing round showed evidence of strong investor demand, as the offering was upsized from about $17.5 million in gross proceeds (about $20.1 million including the over-allotment option) to about $20.0 million (or about $23.0 million after exercising the over-allotment option.

Kwan says he is comfortable with the company’s leverage levels and is treating the closing of the financing round as a positive for the stock. The analyst also argued that Sangoma is currently trading at a noticeable discount to its peers.

“At under both 1.0x EV/Sales and 6.0x EV/Adj. EBITDA (CY20e), well below the peer group at 3.6x and 10.6x respectively, STC is attractively valued on both an absolute and relative basis given its superior organic growth, solid ROIC and FCF profile, healthy balance sheet, M&A upside, and the strong execution from its proven management team,” writes Kwan.

The analyst is maintaining his forecasts for fiscal 2019 and fiscal 2020, calling for 2019 revenue and adjusted EBITDA of $108.1 million and $11.6 million, respectively, and 2020 revenue and adjusted EBITDA of $122.0 million and $16.6 million, respectively.