Baylin keeps $1.60 target price at PI Financial

The COVID-19 crisis is an opportunity to increase operational efficiencies for Baylin Technologies (Baylin Technologies Stock Quote, Chart, News TSX:BYL), says PI Financial analyst David Kwan, who updated clients on the company in an April 7 note.

Kwan maintained his “Neutral” rating and $1.60 target price, which at press time represented a projected 12-month return of 90.5 per cent.

Toronto-based wireless tech company Baylin Technologies gave a corporate update on Monday where it detailed the company’s response to the COVID-19 pandemic, particularly focused on its cost reduction initiatives.

“In response to the economic and business challenges brought on by Covid-19, the Company is undergoing a comprehensive assessment of its operations and costs to ensure it remains competitive. In addition to efficiencies implemented in Q4 2019, the Company has implemented a cost saving plan that will reduce expenses by approximately $6.5 million annually, of which approximately one-third of the reduction is expected to be permanent,” the statement read.

Baylin said it will be postponing or cancelling discretionary expenditures, reducing travel costs, freezing all non-essential hiring, deferring a portion of senior executives’ salaries and temporarily laying off a number of employees. As well, the company will be postponing the release of its first quarter financials until June 16, about a month after previously scheduled but still in compliance with Canadian regulators who have given companies a longer time horizon to deliver financial statements and MD&A due to the COVID-19 pandemic.

Kwan judged the announced moves as having a “slightly positive” impact on the company and stock and has made “modest” revisions in his estimates as a result.

“We note that these savings are incremental to initiatives announced in its Q4 release as well as last year (the total impact was expected to be ~$8 million, with savings of ~$6 million in OpEx and ~$2 million in COGS). These initiatives should help alleviate some strain on the business and balance sheet in particular due to COVID-19 and some prior challenges in some of the Company’s end markets,” Kwan wrote.

The analyst is calling for revenue and adjusted EBITDA in fiscal 2020 of $146.0 million and $13.9 million, respectively, and in fiscal 2021 of $163.5 million and $17.5 million, respectively.

On April 7, Baylin announced that subsidiary Advantech Wireless had received over $1.2 million in purchase orders for its Satcom frequency converters, with management saying the converters, “will be deployed to a major US carrier to help fulfill the urgent demand created by the exponential increase of online traffic resulting from the COVID-19 pandemic. The second order is from NATO for a Naval Satcom Modernization program which requires products offering military-grade performance when operated in less than ideal conditions,” said Randy Dewey, President and CEO, in the press release.

Earlier in March, Baylin released its fourth quarter and full-year 2019 financials, showing revenue up 12.6 per cent from 2018 at $153.3 million and adjusted EBITDA down to $12.5 million from $15.3 million in 2018. For the Q4, revenue was down 16.6 per cent year-over-year to $30.0 million and adjusted EBITDA was down to $2.0 million from $3.9 million in 2018.