In the National Post today
Com Dev bullish on its prospects
2000's best performer
Thomas Hirschmann
Financial Post
Investors fleeing the precipitous declines of the telecommunications and wireless sectors in the past couple of months have found refuge within, well, the telecom and wireless sector.
While everyone else was unwinding gains, wireless communications equipment maker Com Dev International Ltd. has been quietly driving higher.
Much higher. With its 287% return on the year, it's the best-performing stock in the Toronto Stock Exchange 300 index
Com Dev it is closing in on a market capitalization of $1-billion.
So how is it that a maker of space- and ground-based wireless products and telecommunications infrastructure subsystems has been shielded from the market's wrath?
Com Dev is a turnaround story. A new business plan has streamlined the once struggling company. The successful implementation of its strategy has given the company the gumption to make bullish forecasts ahead of its fourth-quarter numbers, due for release late last night.
Under the new business model, the company consists of duel operating divisions: Com Dev Wireless and Com Dev Space. Both have been producing, and investors have noticed.
At the beginning of November, Com Dev Space said it had completed negotiations and been given the green light to begin work on a contract expected to be worth US$20.7-million. The contract is to produce microwave filter subsystems for a undisclosed but apparently major North American space contractor. The customer has an option to order subsystems for another six satellites. This was the largest filter order in Com Dev Space's history.
Not to be outdone, Com Dev Wireless came out with an announcement of its own two weeks later. The company said that its Texas-based wireless division had received a letter of intent and initial purchase orders worth US$43.8-million toward supply contracts valued in excess of US$100-million. The customer, another unnamed "major global provider" -- Com Dev does business with Nokia Oyj and Motorola Inc., to name a couple -- will used its microwave technology in third-generation wireless telecom products.
These contracts are just two in a string of announcements that have driven the stock higher in the past three months. The strong move higher was triggered in September by news of an initiative to develop high-speed wireless Internet systems using Qualcomm Inc. technology. A pair of multi-million-dollar contracts carried the momentum through to the latest two announcements.
With both divisions racking up contracts, analysts are feeling more confident about backing the company.
Susan Streeter, an analyst at Sprott Securities Ltd., dropped the "speculative" and added a "strong" to her "buy" recommendation after the wireless contract. She has a 12-month target of $26 a share.
Peter Notidis, an analyst at Harris Partners Ltd., raised the stock a day later, taking it to "strong buy" from "buy." He increased his target price by 70% to $30 a share from $17.50.
With new management in place, including chief executive Keith Ainsworth, the company is certainly more confident these days.
"We are looking for 50% top-line growth for next year," Mr. Ainsworth said at a lunch for financial analysts in Toronto two weeks ago. He added that analyst earnings forecasts are achievable if a partner is found to share development costs for its new wireless product.
The First Call/Thomson Financial analyst target is earnings of 35¢ a share for 2001. The firm lost $2.12 in 1999, and has lost 19¢ in the first three quarters of 2000.
Hitting its target will be key for Com Dev with the market renewing its focus on real earnings.
Mr. Notidis was expecting the company to break even or have a small loss when it reported last night. However, he forecast Com Dev will have a "decent" profit in the first quarter.
The stock has fallen off in the past week in advance of the quarterly checkup, but rebounded yesterday. The shares (CDV/TSE) rose 60¢ to close at $18.20.
COM DEV INTERNATIONAL LTD:
CEO: Keith Ainsworth
Ticker: CDV
Listed: Toronto Stock Exchange
Head office: 155 Sheldon Drive Cambridge, Ont. N1R 7H6
Tel: (519) 622-2300
www.comdev.ca
INCOME STATEMENT:
3rd Qtr. 2nd Qtr. 1st Qtr.
07.31.00 04.30.00 01.31.00
Operating revenue $000s 50,514 44,935 41,958
Net income $000s 1,570 (1,978) (3,917)
Earnings per share $ 0.05 (0.05) (0.12)
Cash flow operations $000s (891) 1,934 (2,186)
Cash flow ops per share $ (0.022) 0.05 (0.068)
4th Qtr. 3rd Qtr. 2nd Qtr.
10.31.99 07.31.99 04.30.99
Operating revenue $000s 40,571 39,454 44,373
Net income $000s (5,227) (59,116) (1,748)
Earnings per share $ (0.16) (1.84) (0.05)
Cash flow operations $000s (6,210) (2,550) (13,578)
Cash flow ops per share $ (0.193) (0.079) (0.422)
P/E ratio: 23.16 Dividend yield: n.a. (at 12/1/00)
RATIOS:
10.31.99 10.31.98 10.31.97
Net profit margin (21.14) (10.52) 9.70
Return on equity (30.31) (11.66) 16.34
Return on assets (16.94) (8.28) 9.92
Total debt/equity 0.60 0.10 0.12
Current ratio 1.04 1.91 2.71
Avg. price/book value 2.3 4.3 4.6 |
