COVERAGE – TOP IDEAS: Recent acquisitions by Novra Technologies Inc.
(TSXV: NVI) have expanded the Company’s product portfolio and global footprint
for the distribution of broadband multimedia content via satellite and
of 2016, Novra Technologies Inc. (TSXV: NVI – C$0.15) began its transformation.
In that month, Nova Technologies completed the acquisition of Kanata,
Ontario-based International Datacasting Corporation (IDC) to form the Novra
Group of Companies.
time we took note of the IDC transaction. Up to that point, Investorfile paid
little attention to Novra Technologies because we felt that the Company was too
small to sustain long-term profitability. With the inclusion of IDC, we
noticed that the financial results for Novra Technologies began to scale.
Revenues tripled and profits emerged from the operating leverage gained as a
November of 2017, we took note of Novra Technologies again. The Company’s cash
position (combined with GIC investments) increased to about C$2 million as of
September 30, 2017. The Company completed full repayment of all of its bank
loans in 2017 and its balance sheet improved significantly.
recently Novra Technologies caught our attention again. Earlier this month the
Company announced it had completed the acquisition of a 51% controlling
interest of the Wegener Corporation (a USA competitor) for 2 million
shares with a two-year option to purchase the remaining 49%. During the fiscal
year ended September 1, 2017, Wegener had revenues of US$3.4 million.
this news, Investorfile has decided to initiate coverage on Novra
Technologies and appoint the stock to our list of Top Ideas as a small cap
value stock investment opportunity.
Based in Winnipeg, Manitoba,
Novra Technologies Inc. is the parent company of the Novra Group of Companies.
Novra Group is an international technology provider of products, systems and
services for the distribution of broadband multimedia content via satellite and
hybrid networks. Novra’s applications focus includes broadcast video and radio,
digital cinema, digital signage and highly reliable data communications. It
designs, manufactures, installs and supports high-quality solutions for secure
and reliable delivery of digital content. Customers include major broadcasters
and service providers, as well as government (military and civilian
applications) and enterprise networks. In addition to Novra Groups’ core video,
radio and data products, other areas of expertise include encryption and
cyber-security, next-generation hybrid networks (satellite/terrestrial/cloud),
and efficient bandwidth utilization.
September 30, 2017 (last reported), Novra Technologies had a breakout year.
Revenues grew 322% to C$6.8 million over the first nine months of 2017. About
15% of revenues are recurring from monthly maintenance contracts and software
licenses. Because the Company’s gross margins are strong at 50%, Novra Technologies'
net income for this period was C$924 thousand or $0.03 per share. Compared to
2016, the much-improved financial results reflect the inclusion of the
acquisition of International Datacasting Corporation (IDC), deliveries against
a higher-than-normal backlog and from gains in operating leverage.
The Company has stated that fourth quarter results for 2017 (to be released)
will be soft due to orders that have been delayed into 2018. We expect first
quarter of 2018 may also be weaker due to integration costs related to the
fore-mentioned Wegener acquisition and due to the planned installation of AN
Enterprise Resource Planning (ERP) system to manage areas such as
purchasing, inventory, sales, marketing, finance and human resources used in larger
September 30, 2017 the Company’s balance sheet was healthy with C$2.8 million
in working capital. However, given the recent purchase of controlling interest
in Wegener, the Company may decide to raise a small amount of additional capital
in 2018 to fund restructuring initiatives at Wegener. Currently Novra
Technologies has about 35.3 million shares issued and no outstanding warrants
or convertible debt.
We see tremendous
value in the Company’s shares. For fiscal 2017 we believe Novra Technologies
will report annual revenues near C$9 million and earn an EBITDA of C$1.1
million (12% margin). Under this scenario the stock currently trades at a
valuation which is less than four times the Company’s underlying Enterprise
Value (EV) to EBITDA ratio. This is very inexpensive.
see the value in the stock price today, but we also like the future growth
prospects. According to the Company, the controlling interest acquired in
Wegener will bring significant scale to its existing business with new product
lines in the audio and digital signage space. Wegner also strategically
positions the Novra Group to manufacture and sell more products in the USA. Novra
Technologies has disclosed that it is on a short list to win a major contract
from a U.S.
broadcaster (a current customer) for a large radio network product refresh to
be deployed in 2018.
result of our analysis, Investorfile recommends that small cap investors should
take advantage of the current stock valuation levels of Novra Technologies and
begin accumulating its shares.
forward, we forecast that, by the back half of 2018, the Company could achieve
a quarterly revenue run rate of about C$3 million (C$12 million annually). On
this revenue base, EBITDA of about C$1.56 million (13% margin) could be
this forecast, we suggest that investors should continue to accumulate shares
of Novra Technologies over time up to a price of C$0.30, which implies a
forward multiple of about six times EV/EBITDA. That said future acquisitions
could drive the stock price of Novra Technologies beyond our accumulation price
target of C$0.30, generating high returns for early investors.
of Novra Technologies owns about a 17% stake in the Company. The next largest
shareholder with 11% ownership is the Crocus Investment Fund, a
Manitoba-based Canadian Labour-Sponsored Venture
Capital Corporation.Of note, the Crocus Investment Fund is currently
Company websites: www.novra.com and www.novragroup.com.
ownership disclosure: Yes: TSXV: NVI
article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
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is not engaged in an investor relations agreement with Novra Technologies Inc. nor
has it received any compensation from Novra Technologies Inc. for the
preparation or distribution of this article.
author of this article has acquired and may trade shares of Novra Technologies
Inc. through open market transactions and for investment purposes only.