I shared a pretty reasonable path to $15/share. You need $100M EBITDA from ITS. So to get to $30/share you need $200M in EBITDA. What would you need to believe?
PATH TO $15
I highlighted that the current ITS companies can generate $60M EBITDA with converting existing backlog at historical win rates. This assumes no new pipeline expansion.
IF you assume that governments are going to increase the reliance on user fees then this adds another $10-$20M of growth from pipeline from ETC and IRD.
I then added the remaining capital deployment to fill the $100M EBITDA goal from ITS alone.
It is not a far fetched path to triple the ITS earnings with the plan they have in place.
And the model that John Rim shared essentially gets you to the same place, but shows limited organic growth from IRD and no pipeline growth. It also assumes $30M per year from historical contributions from WiLan.
In my valuation, I assumed $200M value for WiLan and no upside to any major litigations. It is just the $30M per year without any major litigation windfalls. Just a bunch of singles and doubles. No home runs.
PATH TO $30... IS IT POSSIBLE?
To get above $15/share, WiLan has to be worth more and convert its pipeline. Todd Coupland at CIBC estimates that "the undiscounted value of the patent portfolio is $750M USD". Or 1 Billion CAD. That is worth amost $9 undiscounted.
To get to $25-30/share you have to believe that the Apple verdict stands and then that is used as a basis for signing up other wireless companies.
QTRH can then take that cash and raise their target from $400M to $1B+ of ITS companies and generate $200M of EBITDA.
So... putting this all together, things can get pretty exciting around here if the Apple verdict stands or WiLan settles and signs a major global licensing agreement with Apple.
Putting this in context, the current Apple lawsuit essentially enables Quarterhill to buy TWO to THREE more ETCs. This assumes they use 1/2 cash and 1/2 debt.
So, yes, Apple is a major catalyst for so many reasons. It is the catalyst to get investors to realize that WiLan is worth much more than -20M today in market cap (yes that is a negative!). As I previously mentioned, on a sum of the parts basis, the market has already priced in an Apple loss at CAFC and that WiLan loses every subsequent single court case and is forced to write down its more than 5k patents to zero.
I can see why Paul Hill is putting every $ of salary into the stock.
IF PAUL HILL LIKES THE STOCK, WE LIKE THE STOCK!
WE LIKE THE STOCK!
WE LIKE THE STOCK!
WE LIKE THE STOCK!