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Is it time for space tech company MDA to shine?

Trading at less half the price when the stock debuted two years ago, investors may be wondering what’s up with MDA Ltd (MDA Ltd Stock Quote, Charts, News, Analysts, Financials TSX:MDA), the Canadian space tech firm with plenty of skin in the hot sectors of space robotics and satellite intelligence. 

One of its boosters is portfolio manager John Zechner, who’s been singing MDA’s praises for a while now, with little to show for it. But the stock is still in his Top Picks list, and Zechner is confident that either the market or a savvy buyer will eventually see the value in MDA.

“I picked this one a couple of times in the past few years and it hasn’t quite worked out yet. It’s been a downward curve,” said Zechner of J Zechner Associates, who called MDA one of his best ideas in a BNN Bloomberg segment on Thursday.

“These guys are like the arms dealers of the Space Race and they’re just so well positioned with a great growth profile for the next five years,” he said.

MDA’s success was on display last month when they reported fourth quarter and full 2022 results, with revenue up 34 per cent for the year to $641.2 million and adjusted EBITDA up 15 per cent to $157.9 million. Perhaps just as impressive were its order bookings, which grew by 50 per cent to $1.2 billion.

For 2023, management guided for 20 per cent year-over-year revenue growth and 19 to 20 per cent EBITDA growth, with contributions from its three segments in Geointelligence, Robotics & Space Operations and Satellite Systems.

“For MDA, 2022 was a year of strong growth that showcased our ability to leverage our unique competitive position in multiple growing space markets to expand our customer and geographic footprint,” said CEO Mike Greenley in the company’s fourth quarter press release on March 23.

MDA was previously MacDonald, Dettweiler & Associates, a Canadian space robotics firm, which was merged into US company Maxar Technologies and then, three years ago, bought again from Maxar by Northern Private Capital.

Maxar itself had been underperforming as a stock up until it was acquired this past December by private equity, and Zechner says there’s a chance that MDA, currently down about 30 per cent for the past 12 months, could follow the same path.

“I sat there with that [Maxar] stock and it traded at 5-6x operating cash flow and you shake your head and then suddenly around Christmastime, Merry Christmas, they got bought out at basically double what the stock was trading at,” he said.

“It just shows you that these things, either the market revalued them properly over a period of time or someone’s going to step in and take a run at them,” Zechner said. 

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