Urthecast Corp T.UR

Dundee Capital Markets: Buy rating and $7.50 target for UR

[shakerman640]

According to Dundee Capital Markets:

https://is.gd/0MsHQ9

UrtheCast Corp.

(UR-T: C$4.34)

June 22, 2015

BUY, High Risk

Dundee target: C$7.50

UrtheCast - The Next Generation; Raising Target to $7.50

We reiterate our BUY recommendation and raise our target following an active week at UrtheCast. Not only did the company unveil its 'first light' videos earlier last week in New York, the company closed the week with a staggering announcement that it plans to launch a 16 satellite constellation that combines 8 optical and 8 SAR satellites, which will be fully funded via MOUs with multiple government entities.

From our perspective, the capital markets and media events showcasing UR's high definition videos were impressive in both quality and the amount of analytics that could be captured. While we were further impressed with the company`s web platform and launch plans, and believe that this summer will be an exciting period in the company`s evolution to revenue and growth, UR's late week announcement was a significant incremental milestone for the company as building out a 16-satellite constellation will effectively de-risk the story from the ISS, but more importantly, allow UrtheCast to become an end-to-end supplier into the earth observation markets. Once the constellation is built and launched, it will have one of the most competitive satellite networks available in the B2G and B2B markets.

Unveiling F2017 Estimates

For F2017, we are unveiling revenue of $236.7 million, adjusted EBITDA of $66.5 million and adjusted EPS of $0.53. Our model assumes that the MOU announced will begin in Q1, while additional MOUs will kick in Q2 and Q4. Our unpublished Q4 exit rates annualize to revenue of almost $350 million, adjusted EBITDA of $87 million and adjusted EPS of $0.70.

Upcoming milestones:

• Additional MOU signings and details becoming available (ongoing)

• HRC IOC expected in latter half of Q3 (end of July).

• HRC related LOI conversion, additional distribution agreements, and potential direct engagement with the US government (ongoing)

• Media partnerships and brand partners (ongoing)

• MRC pipeline conversion and additional engineering services work (ongoing)

Target Price Valuation Methodology:

Our $7.50/share target price is based on 14x our F2017E adjusted EPS estimate (in-line with comps), further supported by our DCF analyses.