Sangoma Technologies Corp T.STC

Alternate Symbol(s): SANG

Technology Communication Equipment

Sangoma Technologies Corporation is engaged in delivering cloud-based communications as a service solution for companies of all sizes. The Company is a business communications platform provider with solutions that include its unified communications as a service (UCaaS), contact center as a service (CCaaS), communications platform as a service (CPaaS), and trunking technologies. Its enterprise-grade communications suite is developed in-house and available for cloud, hybrid, or on-premises setups. Additionally, the Company provides managed services for connectivity, network, and security. It offers hardware and software components that enable or enhance Internet protocol communications systems for both telecom and datacom applications. Its product line includes data and telecom boards for media and signal processing, as well as gateway appliances and software. Its phones and devices include voice over Internet protocol (VoIP) hardware, headsets, telephony cards, and accessories.

TSX:STC - Post by User

Sangoma Technologies Corp > pre consolidation of $1.37

<< Previous

Bullboard Posts

Next >>

Comment by Torontojayon Jun 15, 2022 8:12pm

153 Views

Post# 34759957

RE:pre consolidation of $1.37

Tan4646 wrote: PLease correct me if I am wrong but, Unfortunately it is looking to be pretty simple.. Current ratio of .70,,,, tangible assets only $90M,, only $16M in cash.. only $4M in Cash flow from ops last qtr...

How much dilution will be needed? and they are not the only ones,,

I don't see it as bad as you do. Also, why are you focusing on tangible book value? Does the company plan to liquidate its assets to fund its return to shareholders? The company is worth a lot more than their physical book value and it derives most of its value from its intangibles such as client customer contact list, or copyright to software. The way I see it is that the company will continue to use its net assets both physical and intangibles to generate higher returns than what its stated book value would be able to achieve. This is the main reason why I wouldn't focus too hard on tangible book value.

One shouldn't make a decision on a particular quarter but to look at the bigger picture. Over the next 12 months, the company is on pace to achieve US $30m in free cash flow and is currently trading below 10 times free cash flow. I think that's a good deal given its growth profile.

Just to put things into perspective. A company with US $30m in free cash flow growing at 0% with a required return of 10% should have an intrinsic value (market cap) of 10 times free cash flow or the equivalent of US $300m. Divide by ~ 31.8m shares and using a conversion rate of 1us = Cad 1.29 gives us $12.16/share!

Things get a bit more interesting if you play with the growth rate. Suppose the company can grow its cash flow at a rate of 2% indefinitely. If investors require a 10% return, and a 2% growth rate, then the intrinsic value for Sangoma would be [US 30m/ (10% -2%) ] / 31.8m =~ US $375/ 31.8m =~ CAD $15.21/share

I do not believe Sangoma should be viewed with such pessimism and that it should trade below 10 times its free cash flow. If you believe Sangoma is a growth story with the potential to enter new markets then there's no reason why Sangoma would struggle to increase its cash flow beyond 2% per annum. I'm quite confident Sangoma can increase earnings beyond the expected inflation rate.

Sangoma is cheaper today than when I first purchased shares a few years back. Eventually the share price will catch up to its earnings and the company will re-rate much higher for above average returns.