RE:Motivations for reading/ posting... Spoken like a long term BlackBerry shareholder. Do you still use the Pearl?
Don't believe me, believe Todd.
Let's spend some time on Todd's report:
"We continue to recommend Quarterhill’s shares and reiterate our Outperformer rating. We base our $4.50 price target (prior $4.00) on a NAV approach, which includes a 12x EV/EBITDA multiple on our 2022E (previous 2021E) Intelligent Transportation Systems (ITS) EBITDA forecast pro forma the acquisition. Currently, its total valuation is 12x EV/2022E pro forma EBITDA of ITS, while ascribing no implied value to the lucrative Licensing segment. Quarterhill’s shares are attractive and should be purchased."
We base our thesis and valuation for Quarterhill’s value on three points:
1. The IP NAV of ~US$2.40 per share is a hidden value: The patent licensing opportunity of the patent portfolio is ~US$750MM (undiscounted). The Apple jury award is excluded from our price target but included in our NAV. We discount this by 80% as the final value and timing are unknown.
2. Improved growth profile of its predictable revenue: Intelligent Systems’ value is ~$2.77/share. See Exhibit 1 table for further detail.
3. A balance sheet to execute the plan: Pro forma debt is ~$24MM or ~$0.21/share. It includes ~$45MM in cash. As Quarterhill requires ~$50MM to operate its business, any further acquisitions are likely to require incremental capital.
Here is why Todd's valuation is ultra conservative and why there is significant room for price target increases.
1. He values the WiLan appeal at 0.24 in his 4.50 target. As you can see he gives an 80% haircut to the second jury verdict.
2. He states that if the second jury verdict is reinstated, his target is $6.00
3. He does not account for any additional fees post judgment, no Intel based phones and definitely not the original $0.85 award.
4. His valuation discounts future cash flows by 15% over 5 years. So in his model, a Motorola signing is implied by year 5 and discounted in today's dollars. So his model would decrease from 2.40 -> 2.30 based on the Motorola signing would be ultra conservatively be valued as 0.10 ( his model assumes we get 50 million in 2027 and investors have a 15% CoC). But we get 0.50 in the bank. Hence, a Motorola signing plus Apple would lead to a $6.50 target from Todd alone.
6. If the FIRST jury verdict is reinstated you double his Apple valuation to get to an $8 target.
My thesis is this is one of the greatest ASYMMETRIC investments available anywhere in the market today.
All of this upside is free. The market has priced all the patents at ZERO. Even the Motorola stay and resolution is priced at ZERO.
INCREDIBLE