www.appliedproductivity.com
This blog has been saying for several years now that Intrinsync Technology needs new products and new revenue streams.Their last quarterly report (Q3) shows a continuation of the same trend seen over the last 2 years.Consequently they have decided to use their open-Q module technology and it's revenue stream to get themselves a better deal.It is not that they weren't getting orders and even some very big ones.But their revenues were showing little or no year over year increase.Consequently this blog tried to arrange a merger with Sangoma Technology which is in their market space but showing more growth.After several attempts at a Canadian merger Intrinsyc decided on an American partner.They chose to dance with Lantronix which is listed on the Nasdaq exchange and has a market cap of about $92 million.
The Future for Open-Q Modules
Intrinsyc Technology was originally doing much more software technology but they gradually switched to doing more hardware and then adapted this hardware technology.I believe they got a hardware contract from Quallcom to buy and build computer modules they referred to as Open-Q modules.And gradually they only sold these modules.This blog criticized them for being too dependent on a single product line.So they started to modify these modules to be used for various applications.Still the market was too limited and revenues stalled.However they were getting some bigger orders and this blog became somewhat hopeful of their future.Even at that, this blog recommended an alliance with Sangoma Technology which had a more rapidly growing product line and market.Sangoma is located in Markham, Ontario and the distance between them may have hindered a merger.
A Healthy Merger
This blog would have preferred to see a Canadian merger, especially with Sangoma Technology.However it will probably do well with Lantronix(listed on the Nasdaq) which actually has a smaller market capitalization. Sangoma produces communication infrastructure and Intrinsyc Technology designs,produces and modifies telecommunications and internet computer modules.ITC has increased the number of applications recently partly because it modified the internal software of it's Open-Q modules. It still has it's some of it's software capability remaining.In addition, ITC now gets some quite large orders to manufacture and modify communications equipment.Ideally this could have been a very successful Canadian combination.If the merger with Lantronix is as suitable, look for ITC to drift slowly towards $2.00 a share by early summer.If not then Sangoma will likely be watching closely.
This blog and the author (above) often sees companies differently than other financial websites.One such company is Capital Power (CPX).A number of websites including several banks show the CPX price/earnings ratio as about 75.This is a misleading statistic.A better measure of the performance of Canadian utilities is price/adjusted EBITDA or price/adjusted funds from operations (AFFO).This would produce a present P/E ratio of about 13.
Non-recurring Items
Capital Power is in the unusual situation where it's generating capacity and revenues show good increases while it's adjusted net earnings show losses in Q3.It has made a number of large acquisitions. And at the same time spent a lot of money converting it's coal-fired operations to dual-fuel operations.This has lead to large expenses and created net losses.On the other hand adjusted EBITDA has been revised upwards.One factor here is the increase in the Alberta power price from $47 per MWh to $59 per MWh.Another is the new revenues from their recent acquisitions including Arlington Valley,Goreway (in Brampton) and New Frontier Wind.As a result 2019 annual guidance for adjusted funds from operations (AFFO) has been raised upwards by 12% or from $485 to$535 million up to $535-$560 million.
Better Performance Data
Both Scotiabank and TD bank show negative e.p.s. and a price/earnings ratio of about 75 times.This implies that Capital Power is an expensive stock.But using adjusted EBITDA per share the P/E ratio is about 15 times 2020levels..Technically the banks are correct but this an accounting anomaly and gives a very misleading picture of an aggressive,well-managed Canadian utility.This healthy increase in AFFO will allow CPX to make further accretive acquisitions and raise it's dividend by7% in 2020and 2021.Consequently look for CPX to inch upwards towards $38 before the next dividend increase in Q2. https://www.capitalpower.com/
