Investor’s Digest of Canada, MPL Communications Inc.
133 Richmond St.W., Toronto, ON, M5H 3M8. 1-800-804-8846
– Digested from a Nov. 7 report by analysts Pardeep Sangha and Neil Bakshi
Third quarter numbers were good
In the tech stocks sector, For Messrs. Sangha and Bakshi, Absolute Software Corp. (ABT-TSX, $7.08) remains a definite “buy,” but one with a speculative risk. They’re also sticking with their 12-month price target of $8.60 a share. They write:
For the first quarter of fiscal 2014 (ended Sept. 30), Absolute Software downloaded $23.8 million in sales contracts – a 15 per cent increase year over year.
Absolute reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $3.3 million – an increase of 89 per cent YOY, as well as just $200,000 below the consensus call.
Meanwhile, at $5.4 million, the company’s operating cash flow was $100,000 higher than in the first quarter of fiscal 2013. It was also $1.1 million higher than what the Street had been hoping for.
Absolute’s good results were fueled by strong numbers from its core Computrace products.
Indeed, the company saw sales of its theft management product rise 17 per cent to $15 million from $12.8 million a year ago.
Absolute also saw sales contracts for its device management and security products grow 15 per cent to $6.7 million – an increase of $900,000 year over year.
Elsewhere, the company saw international sales contracts jump 32 per cent YOY – the result of a big Computrace sale in Asia.
In the interim, Absolute continues to have a strong balance sheet, given no debt, as well as $68.5 million in cash and investments.
The company also recently announced it will raise its next quarterly dividend by 20 per cent to $0.06 a share. For fiscal 2014, Absolute expects sales contracts and cash flows to top levels in fiscal ’13. As well, the second half of next year is expected to be stronger than the first half, thanks to both product integration and higher sales.
For fiscal 2014, we see Absolute’s sales contracts jumping to $97.7 million, while posting adjusted EBITDA of $13.5 million. For fiscal ’15, our comparable numbers are $109.8 and $16.8 million.
Headquartered in Vancouver, Absolute Software turns out products for computer security and asset management. Its software is designed to protect against theft of lost or stolen computing.