Quarterhill is good for a double, this investor says

January has been a good month for a number of tech stocks and that includes Quarterhill (Quarterhill Stock Quote, Charts, News, Analysts, Financials TSX:QTRH), which is up 20 per cent since January 1. Expect more where that came from — that’s the advice from portfolio manager Stephen Takacsy, who says Quarterhill’s share price has plenty of reasons to head north, first among them being the company’s growing business in electronic tolling and smart transportation infrastructure.

“They’re basically leaders in North America in electronic toll lanes and traffic data collection and they’re also world leaders in weight and motion technology. They have a technology that weighs trucks as they’re moving so they don’t have to stop on the side of the road,” said Takacsy, CEO of Lester Asset Management, who spoke on BNN Bloomberg on Tuesday.

“Quarterhill now has a backlog of over $800 million in contracts for the transportation systems business because governments are looking for more ways to collect money from drivers to pay for the transportation infrastructure,” he said.

Watchers of the stock are likely waiting for the other shoe to drop on Quarterhill, which along with its intelligent transportation systems (ITS) tech has an IP licensing business, WiLAN, that it’s been waiting to unload. Management announced its intentions over a year ago and is still in the strategic review process.

Takacsy says Quarterhill will gain more attention once it becomes a pure-play transportation tech company and he is projecting the stock to double in value over the next two years.

“We expect some imminent news that they finally sold this division so that they can become pure play in intelligent transportation systems,” he said. “We think WiLAN should fetch about $1 per share once it’s sold, and that means that if you’re paying $1.80 per share, you’re really getting the ITS business on the cheap.”

“Once it has sold I think many institutional investors that are on the sidelines would buy the stock because it’ll become a pure play ITS company, and it should get a nice multiple lift because the comparables in the sector are trading at much higher multiples of where Quarterhill is trading,” Takacsy said. “I think this is a company where you have 100 per cent upside within the next two years.”