Intrinsyc Technology goes from software to hardware

   Intrinsyc Technology is a junior technology company and one that is not covered often by this blog.But Intrinsyc seems to have transitioned away from software internet services to hardware,at least partially.Intrinsyc (ITC) says that it "is a leader of solutions for the development of embedded and IoT products"On August 9 it had it's second quarter results and it is clear that it's growth in revenues has levelled off.This is not too surprising as it's software products are now in a mature market and it's hardware products are still in the growing stage of the product cycle.Unfortunately hardware is a capital intensive product and Intrinsyc will have to invest more or make more acquisitions.However it is clear that it is introducing new products.       

The Growth Trajectory

Intrinsyc is making several kinds of computing modules.Their biggest seller appears to be the Open-Q embedded computing modules.But it has several types of computing modules as well as a hardware kit that it sells to individuals.Intrinsyc still sells some software services but not as much as hardware.Revenues were $4.6 million a 2% increase from $4.5 million in Q1.And revenues dropped from Q2 in 2016.Adjusted EBITDA showed a small drop from $113,000 to $85 ,000 in Q1 2016.                                   Revenues for 6 months were down from $9.1 million in 2016 to $9 million in 2017.While adjusted EBITDA dropped from $250,000 to $187,000 in 2016.However ITC is still on track to hit almost$1 million in adjusted EBITDA for 2017.

Options for the Future

It is this blogs opinion that ITC must make a few acquisitions or be acquired partially or totally.However no decision has to be made immediately.If hardware revenues don't pick up by the end of 2017 or Q1 in 2018 they had better have a small acquisition lined up.For example, DCM has Iotum telephony technology and would be an excellent hardware combination.ITC has the ability to make a sizeable secondary offering and raise the required cash.There are other possibilities around but ITC must be aware that it has positive EBITDA and could be a target itself of bigger technology companies.Most junior technology companies with similar revenues have negative adjusted EBITDA and are of less interest.http://intrinsictechnology.com/  ;

Algonquin Power shows "big numbers" and a small price increase

Algonquin Power is a bit of a mystery these days.It recently released it's second quarter report and it had some "big numbers".However investors barely reacted to it;the stock chugged ahead to $13.80 while it had been $13.25 before the report.It certainly isn't because AQN is not doing it's work.They have been very busy!Recently it announced that it had completed the acquisition of Empire District Electric and this took about  18 months to wrap up.It also(in this quarter) bought a few generating stations in California.Consequently AQN revenues were up 103% over the same quarter in 2016.

Earnings, earnings,earnings

All categories of earnings were up over the same quarter of 2016.Net earnings at $47 million was up 92% to$47 million for the second quarter and for six months at $74 million up from $67 million in 2016.Adjusted EBITDA went from $99 million  in 2016 to $198 million .For the six month period  adjusted EBITDA went from $247 million to $452 million.While adjusted funds fiom operations went from $78 million to $120 million for Q2 and from $197 million to $328 million for six months.This is a good earnings report.But the problem is that the trajectory of the growth in earnings is greater than the trajectory of the share price.AQN shares are chugging along but not nearly as well as the growth in earnings.

Recommendations       

This blog has two recommendations that could improve their share price.First it should be noted that the yield on AQN shares at 3.42% is below the industry average  yield.AQN's big increases in earnings could easily support a dividend increase to bring a 4.0% yield. But this will improve their trajectory only slightly.In order for Algonquin Power to reach $15 and above it will need to  release some of the equity that now appears to be locked in the American regulatory umbrella.A new equity issue from Algonquin or better from the newly formed Liberty Utilities (listed on the NYSE) would be needed to raise cash that is used to buy Canadian assets or even a small Canadian or Can -Am utility.A purchase of Atlantic Power or Alterra Power or even Boralex would show that earnings and assets under the American regulated umbrella is not locked in.An acquisition that is only slightly accretive to Algonquin's own earnings would "do the trick".Shareholders would surely approve of this strategy.            use Workathon for analysis of Cdn. utilities;use Workathon for utility solutions

Aimia works on a New Plan

      On August  9 Aimia released it's second quarter results.Investors waited patiently for the report after Air Canada announced their intention of non-renewal for the upcoming new contract in June 2020.After the announcement Aimia's share price dropped to a low of $1.40.Most investors realized that this announcement would not have a large impact on 2017 earnings but there would likely be some redemptions.In fact there were only about 2% redemptions.But Aimia did not make any major announcement on the forthcoming Air Canada non-renewal in the Q2 report.That aside Aimia did make some changes. 
                                    

Second Quarter Highlights

Aimia recorded gross billings of $20 million which is down 2% from 2016.But their 2017 guidance has been maintained.They expect gross billings of $520 million and adjusted EBITDA of $40 to $45 million.And they expect an annual free cash flow of about $54 million.They continue to make operational cuts and expect substantial savings from them by 2019.And they have suspended dividends for the forseeable future.

Other Changes

Aimia will have a new CFO in September.They have recently sold a small loyalty program with a gain of $5.4 million.And they are in discussions for new partners in their Aeroplan loyalty program.Here is where they must obtain progress and keep their shareholders aware of it.

Non-Renewal of Aeroplan

It is in this quarter that Air Canada gave notice of it's intention of non-renewal of the Aeroplan program with Aimia.This caused the stock to drop from the $9 level to $1.40 per share.But it is the position of this blog that Air Canada cannot cancel the contract with Aimia.There have been no  performance issues to cause a breach of contract.And it is hard to cancel a long term contract unless both sides agree.Doubtless Aimia did not agree.So in effect there is no "real cancellation".But Aimia cannot continue without an agreement.Soon irritations and performance issues would start to appear.It is better for Aimia to take a not as profitable amended agreement but continue on.

Recommendations

Aimia needs to hire a contract expert until the Aeroplan problems have been completely remedied.Secondly this blog strongly suggests that Canada Pension Plan take a small position here (5 to 10%)to shore up and get future capital gains on Aimia.A secondary and smaller position by Caisse Populaire would strengthen the stock price almost immediately.This blog sees Aimia's share price at the $3.25 to $3.50 level by Christmas.

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