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Baylin keeps $1.60 target price at PI Financial

Baylin
Baylin
This RF testing chamber at the Baylin research centre in Israel is used to test the performance of antennas.

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.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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