Tech sector june 15
- 1. Small Cap Tech Update June 21, 2010 M Partners RES Small Cap Tech Index Update The M Partners RES Small Cap Tech Index is made up of 132 TSX and TSX.V technology companies with market capitalizations of between $5M and $500M. We track the performance of the index periodically as a barometer of the Canadian small cap technology sector. % Price % Price FW EV / TTM EV / Change Change Key Stats EBITDA* EBITDA FW P/E* (Last Report) (YTD) RES Small Cap Tech 7.4x 8.0x 16.6x -5.8% 5.9% S&P/TSX Composite 8.2x 10.5x 12.75 -2.4% 1.4% Difference -0.9x -2.5x 3.8x -3.4% 4.5% *Based on 44 companies w/Estimates Source: Capital IQ, Bloomberg, M Partners Since our last Small Cap Tech report on April 30, 2010, our index has underperformed the S&P/TSX composite index with a return of -5.8% vs. -2.4% as of June 15, 2010. Investors were shedding risk by moving to liquid, dividend- yielding stocks, or gold. Considering that Small Cap Tech is considered by investors to be risky, and less liquid than other sectors, the downdraft could be expected. Notwithstanding recent underperformance, the RES Small Cap Tech has returned 5.9% YTD versus a 1.4% YTD for the main index. Our index continues to trade at a discount to the S&P/TSX on both forward and trailing EV/EBITDA multiples of 10.4% and 24% respectively. Top 5 and Bottom 5 Performers % Price Change % Price (Last Change Company Name Market Cap Last Price Report) (YTD) Top Five Bluepoint Data, Inc. (TSXV:BLP) $8.85 $0.20 73.9% -20.0% Aptilon Corporation (TSXV:APZ) $48.20 $0.25 61.3% 150.0% Free Energy International Inc. (TSXV:FFX) $5.24 $0.40 40.4% -11.1% Healthscreen Solutions Inc. (TSXV:MDU) $17.20 $0.20 31.3% -2.3% VIQ Solutions Inc. (TSXV:VQS) $32.90 $0.40 30.0% 47.2% Bottom Five Call Genie Inc. (TSX:GNE) $5.40 $0.07 -52.0% -70.0% Intermap Technologies Corp. (TSX:IMP) $41.90 $0.80 -46.6% -61.0% Natcore Technology, Inc. (TSXV:NXT) $12.40 $0.77 -46.2% 27.9% Firan Technology Group Corp. (TSX:FTG) $5.87 $0.33 -40.0% -21.4% Tranzeo Wireless Technologies Inc. (TSX:TZT) $34.90 $0.75 -39.7% -41.6% Source: Capital IQ Sub-Segment Performance Member of the Investment Industry Regulatory Organization of Canada (IIROC) Daniel Lee, Participating Organization – Toronto Stock Exchange (TSX) Ron Shuttleworth, Research Associate M|PARTNERS Member Canadian Investor Protection Fund (CIPF) 416.603.7381 ext. 277 Equity Analyst 416.603.7381 ext. 250 dl@mpartners.ca Research • Trading • Advisory rs@mpartners.ca
- 2. Small Cap Tech Update June 21, 2010 The technology sector was not immune to the % Price Change % Price general declines in the market cause by (Last Change uncertainty related to the EU debt crisis. Sub-Segment Performance Market Cap Last Price Report) (YTD) Mobile Ecosystem Bridgewater Systems Corporation (TSX:BWC) $ 240.40 $ 9.72 8.0% 16.9% Most of the companies in the sub-segments DragonWave Inc. (TSX:DWI) $ 233.50 $ 6.32 -23.6% -44.9% iseemedia Inc. (TSXV:IEE) $ 9.41 $ 0.13 8.3% -35.0% experienced monthly declines with some notable MOSAID Technologies Inc. (TSX:MSD) Multiplied Media Corporation (TSXV:MMC) $ $ 253.60 30.00 $ $ 21.56 0.12 -0.2% -32.4% 12.8% -29.4% exceptions including iLOOKABOUT, Wi-Lan, Tio Redknee Solutions, Inc. (TSX:RKN) $ 84.20 $ 1.40 -11.9% 40.0% Networks, and Bridgewater Systems. Each of Sandvine Corporation (TSX:SVC) Sierra Wireless Inc. (TSX:SW) $ $ 290.00 226.70 $ $ 2.13 7.30 -1.8% -7.3% 69.0% -32.9% these companies either announced great quarters Tranzeo Wireless Technologies Inc. (TSX:TZT) $ 34.90 $ 0.75 -39.7% -41.6% or significant corporate developments. Vecima Networks Inc. (TSX:VCM) $ 101.50 $ 4.55 -37.7% -24.8% Wi-Lan Inc. (TSX:WIN) $ 323.00 $ 3.15 7.9% 19.8% Average -11.8% -4.6% The performance of the mobile ecosystem was Payments and Transaction Processing heavily impacted by the declines of the mobile GuestLogix Inc. (TSX:GXI) $ 88.00 $ 1.38 -9.9% 50.5% PNI Digital Media Inc. (TSXV:PN) $ 54.30 $ 1.60 -12.2% -4.2% gear vendors such as Vecima Networks, Tranzeo Selectcore Ltd. (TSXV:SCG) TIO Networks Corp. (TSXV:TNC) $ $ 5.12 31.60 $ $ 0.05 0.68 -37.5% 10.9% -16.7% -1.6% Wireless, and Dragonwave as they all missed lofty Average -12.2% 7.0% expectations. Despite hot demand for capacity, Cloud/SaaS competition from traditional vendors like Ericsson Cortex Business Solutions Inc. (TSXV:CBX) $ 58.00 $ 0.40 -13.0% 77.8% Descartes Systems Group Inc. (TSX:DSG) $ 382.30 $ 6.22 0.6% -1.3% and Alcatel should also heat up and these upstarts iLOOKABOUT Corp. (TSXV:ILA) $ 15.50 $ 0.50 20.0% 15.4% may find more challenges ahead. Sector Average 2.5% 30.6% consolidation should continue. Group Average -9.5% 3.9% Source: Capital IQ M Partners Coverage List EV/EBITDA Compsets Target Share Market FY'10 FY'11 Technology Coverage List FY'10 FY'11 FY'10 FY'11 Rating EV Price Price Cap (M) EBITDA EBITDA GuestLogix Inc. (TSX:GXI) 8.5x 5.2x 16.1x 12.8x $2.30 $1.37 $87.38 BUY $85.94 $10.13 $16.44 Bridgewater Systems Corporation (TSX:BWC) 8.6x 5.8x 21.3x 13.9x $14.30 $9.83 $243.15 BUY $158.90 18.50 27.36 Redknee Solutions, Inc. (TSX:RKN) 8.3x 5.7x 21.3x 13.9x $1.90 $1.40 $84.18 BUY $64.41 7.76 11.40 Sandvine Corporation (TSX:SVC) 26.0x 13.2x 21.3x 13.9x $1.90 $2.18 $296.85 HOLD $208.41 8.01 15.84 iLOOKABOUT Corp. (TSXV:ILA) 14.4x 2.2x 8.6x 6.9x $1.40 $0.60 $18.57 BUY $16.54 1.15 7.58 Cyberplex Inc. (TSX:CX) Restricted $0.60 $41.08 $25.51 Restricted Source: Capital IQ, M Partners *Note: BWC, RKN, and SVC have identical comp sets Transactions during May 2010 Transaction Transaction Filing Date Company Transaction Type Status Value (mm) Buyers/Investors Sellers 06/10/2010 OPEL International Inc (TSXV:OPL) Private Placement Announced $6.3 - - 06/08/2010 Azure Dynamics Corp (TSX:AZD) Private Placement Announced $7.0 - - 05/27/2010 Logibec Groupe Informatique Ltee (TSX:LGI) Merger/Acquisition Announced $250.3 Societe Generale Quebec; OMERS Societe Generale Quebec 05/27/2010 Titan Trading Analytics, Inc. (TSXV:TTA) Private Placement Closed $0.9 - - 05/25/2010 Cantronic Systems, Inc. (TSXV:CTS) Private Placement Closed $0.5 GC Global Capital Corp. - 05/19/2010 Cyberplex Inc. (TSX:CX) Merger/Acquisition Closed $75.6 Cyberplex Inc. (TSX:CX) Tsavo Media 05/18/2010 Cyberplex Inc. (TSX:CX) Private Placement Closed $30.3 - - 05/18/2010 ARISE Technologies Corp. (TSX:APV) Public Offering Closed $9.7 - - 05/18/2010 LasVegasFromHome.com Ent. Inc. (TSXV:LVH) Private Placement Announced $2.9 - - 05/17/2010 ARISE Technologies Corp. (TSX:APV) Private Placement Closed $1.8 - - 05/12/2010 Matrikon Inc. (TSX:MTK) Merger/Acquisition Announced $138.1 Honeywell International Inc. (NYSE:HON) - Source: Capital IQ, SEDAR, M Partners Member of the Investment Industry Regulatory Organization of Canada (IIROC) Daniel Lee, Participating Organization – Toronto Stock Exchange (TSX) Ron Shuttleworth, Research Associate M|PARTNERS Member Canadian Investor Protection Fund (CIPF) 416.603.7381 ext. 277 Equity Analyst 416.603.7381 ext. 250 dl@mpartners.ca Research • Trading • Advisory rs@mpartners.ca
- 3. APPENDIX A – RES Small Cap Index Constituents