This electronic component manufacturer for the aerospace and defence industries had its own ransom-ware cyber attack to defend against in 2019.
Firan Technology Group (TSX—FTG) is a provider of avionics products for the aerospace and defence industries, and operates two segments: FTG Circuits and FTG Aerospace. The company has long-term operations in Toronto ON, Chatsworth CA, Fredericksburg VA, and Tianjin, China.
Firan was one of the strongest performers in Calgary-based Acumen Capital Partners analyst Nick Corcoran’s coverage universe in 2019 with a return of 92.9 per cent. The company posted strong financial results throughout the year and completed the acquisition of Colonial Circuits.
Mr. Corcoran expects the operational momentum to continue in 2020. With this in mind the analyst gives the technology stock a ‘buy’ rating and $5.50 target share price.
Potential for a NCIB or dividend
Looking at the numbers the analyst notes: “Firan had a strong start to the year with results ahead of our expectations throughout the year. The results demonstrated operational leverage and margin expansion. With cash flow continuing to grow as the business scales, we expect Firan to continue to allocate capital to strategic acquisitions.
“There is also potential for an NCIB [normal course issuer bid] or dividend. We forecast Firan exiting fiscal 2019 with net cash of $5.1 million with free cash flow of $14.8 million in fiscal 2020 (up 25.8 per cent year-over-year).”
Cyber attack disrupted operations
On a less positive note the company was subject to a cyber attack in early-September 2019 that impacted its systems across North America. Operations were impacted by a ransom-ware attack at each site from a few days to a few weeks.
The analyst does not appear overly alarmed noting: “While the impact of the cyber attack is expected to be larger than we initially expected in the fourth quarter of fiscal 2019, we believe the business remains on track.”
The analyst maintains that Firan is attractively valued at current levels.
This is an edited version of an article that was originally published for subscribers in the February 7, 2020, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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