TOP IDEAS: Sangoma
Technologies Corp. (TSXV: STC) is up 425% with no hype, just strong financial
results. The Company is cashed up and ready to make more acquisitions which
will move the stock price higher yet again.
Investorfile's share price accumulation target of $0.40 for Sangoma
Technologies Corp. was reached on April 24, 2014. For the record, we do not
revise share price targets for our Investorfile Top Ideas - Small Cap Value
Stocks. We have positioned our blog to be one of the first providers of a
pragmatic perspective of a small cap company stock's potential worth, where
there may be uncovered value that has been largely overlooked by the investment
Apologies if this blog sounds like a broken record when it
comes to posting updates on Sangoma Technologies Corp. (TSXV: STC - C$1.10).
But our message remains clear: This stock is significantly undervalued
and continues to be an excellent buying opportunity for small cap investors.
Sangoma Technologies delivers Unified Communications
solutions for SMBs, Enterprises, OEMs, Carriers and service providers. The
Company’s scalable offerings include both on-premises and cloud-based phone
systems, telephony services and industry-leading Voice-Over-IP solutions which,
together, provide seamless connectivity between traditional infrastructure and
new technologies. Sangoma's products and services are used in leading PBX, IVR,
contact centre, carrier networks and data communication applications worldwide.
Unified Communications (UC) is
a fast-growing market within the telecommunications industry. UC implies the
integration between modes of communications like text messages, cell phone,
emails, conference calls, instant messaging, screen sharing, etc., as well as
being able to switch effortlessly between them to enhance the exchange of
information and ideas for a business operation.
Last week, Sangoma Technologies reported its fiscal 2018 Q3
results for the period ended March 31, 2018. This reporting period includes the
financial impact from the Company’s most recent acquisition of all of the key
assets of New Jersey,
USA-based Converged Communication Division from Dialogic Corporation.
Sangoma Technologies’ Q3 results are impressive. Revenues
were C$16.24 million, 138% more than in the same quarter last year. The Company
stated that this was the 13th quarter in row of higher revenue versus the year
prior. EBITDA was C$1.9 million for the quarter, up 160%. Net income was
C$750,000 with an EPS of C$0.015. The Q3 financial results far exceeded analyst
expectations. Management increased its annual financial guidance (again) for
fiscal 2018 to revenues exceeding C$55 million and EBITDA of C$6 million.
In Q3 the Company said that it generated almost C$2 million
in cash from operations, boosting an already healthy balance sheet. Sangoma
finished the quarter with a cash balance of about C$14 million and working
capital of C$16.4 million as result of a C$13 million private placement of the
Company’s stock at C$1.00 per share, which closed on March 15, 2018.
We view the Company’s cash holdings as a potential catalyst
for the stock price. Sangoma’s Management has made six acquisitions over the
last six years to scale the Company. We think that Management will be utilizing
Sangoma’s cash holdings in 2018 to make another acquisition. This blog is of
the opinion that the Company’s next purchase could be the largest acquisition
to date, adding in excess of C$20 million of revenues annually.
Sangoma Technologies’ share price has risen 425% since we
first recommended this stock (See: Sangoma
Technologies: A small cap tech stock trading for value with prospects of growth)
as one of our Top Ideas. While the stock price performance to date is strong,
we think that what will be more impressive are the investment returns that are
still to come for small cap investors who own the stock.
In our opinion, the current valuation of this stock does
not take into account the transformation of Sangoma Technologies to a much
bigger company. Based on the financial impact of recent acquisitions and the
potential for more acquisitions, this stock still has significant upside
potential. That is good news if you own the stock. If not, buy some!
The Company has approximately 47.1 million shares
Sangoma Technologies website: www.sangoma.com
Author Ownership Disclosure: TSXV: STC - Yes
This 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
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
Investorfile.com is not
engaged in an investor relations agreement with Sangoma Technologies
Corporation nor has it received any compensation from Sangoma Technologies
Corporation for the preparation or distribution of this article.
The author of this article has
acquired and may trade shares of Sangoma Technologies Corporation through open
market transactions and for investment purposes only.