TD ExpectationsFor Q4 and upcoming Q's:
| | Q4 2010 | Q1 2011 | Q2 2011 | Q3 2011 |
| Current Mean (as of 1/10/2011) |
.02 |
.02 |
.02 |
.02 |
| Standard Deviation (Current Mean) | 0.01 | 0.01 | 0.01 | 0.01 |
| Previous Mean |
.01 |
.02 |
.02 |
.03 |
| Low Estimate |
.00 |
.01 |
.01 |
.01 |
| High Estimate |
.03 |
.03 |
.04 |
.05 |
| Number of Brokers Estimating | 10 | 8 | 8 | 8 |
========================================
First Call Consensus, number of analysts per rating
| Sell 0 | Under Perform 2 Hold 4
| | Buy 1 | Strong Buy 2 |
=========================================
Not sure if the format will work:
Sandvine Corp.
(SVC-T) C$2.08
Q3 Beats Top/Bottom Line: Emerging as Premium Growth
Stock
Event
Sandvine reported Q3 revenue and EPS that beat expectations. We have
revised our earnings outlook slightly higher and have raised our target to
$2.75 and our recommendation to BUY.
IMPACT: POSITIVE
Many of our fundamental concerns (high customer concentration; high cable
segment expectations; poor expense control) are now old news. At the same
time, geographically the company is more diversified (YTD North America is
47%; EMEA is 25% and APAC is 21%) and the channel revenue (53% of the
total; Huawei and Alcatel Lucent top two customers; NSN had 2/6 new
customers) in our view is evidence that equipment companies are in some
cases pitching Sandvine stand-alone DPI solutions instead of integrated DPI.
RFP activity remains high. Quarterly visibility remains poor, but as the
installed base grows it is less of a concern in our view. While on some metrics
the stock is premium priced (21x FY10E FCF), we believe Sandvine offers
sector-leading organic growth. We continue to base our target on 20x FY11E
FCF, giving $2.75 (from $2.25). We are upgrading our rating to BUY.
Exhibit 1. Earnings Summary (C
00)
Product 18,527 1 8,398 129 54% 9%
Service 5,920 4 ,624 1,296 47% 11%
Total Revenue 24,447 2 3,022 1,425 53% 9%
Street Consensus 22,103
EBITDA 4,355 2,602 1,753 n/a -11%
% Margin 17.8% 11.3%
EPS
.02
.00
.01
Street Consensus
.00
Net Cash/Share (C$)
.63
.66
Source: Company reports, Thomson consensus, TD Newcrest estimates.
Q3/10A TD Ests. Variance
(
00)
Growth
y/y
Growth
q/q
Technology - Software
Recommendation: BUY?
Prior: HOLD
Risk: HIGH
12-Month Target Price: C$2.75?
Prior: C$2.25
12-Month Total Return: 32.2%
Market Data (C$)
Current Price $2.08
52-Wk Range $1.19-$2.52
Mkt Cap (f.d.)($mm) $292.7
EV ($mm) $203.3
Dividend per Share --
Dividend Yield --
Avg. Daily Trading Vol. (3mths) 315218
Financial Data (C$)
Fiscal Y-E November
Shares O/S (f.d.)(mm) 140.7
Float Shares (mm) 121.9
Net Cash ($mm) $89.4
Net Cash/Shr (f.d.)
.64
Net Debt/Tot Cap --
Estimates (C$)
Year 2009A 2010E 2011E 2012E
Sales ($mm) 68.8 93.3 113.7 143.2
Sales (old)($mm) -- 92.3 113.6 142.9
EBITDA ($mm) (5.8) 15.8 20.6 27.8
EBITDA (old)($mm) -- 13.6 19.4 26.2
EPS (f.d.) (0.14) 0.04 0.08 0.11
EPS (f.d.)(old) -- 0.03 0.06 0.10
EPS (f.d.) Quarterly Estimates (C$)
Year 2009A 2010E 2011E 2012E
Q1 (0.04)A 0.00A 0.02E 0.03E
Q2 (0.04)A 0.01A 0.02E 0.03E
Q3 (0.03)A 0.02A 0.02E 0.03E
Q4 (0.03)A 0.01E 0.02E 0.03E
Valuations
Year 2009A 2010E 2011E 2012E
EV/Sales 3.0x 2.2x 1.8x 1.4x
EV/EBITDA nmf 12.9x 9.9x 7.3x
P/E (f.d.) nmf 52.0x 26.0x 18.9x
All figures in C$, unless otherwise specified.
Scott Penner, CFA Doug Taylor (Associate)