Quarterhill Inc T.QTRH

Rough calculation of stock market's excess discount...55c

[shareholders1]

...Starting point is what was paid for recent acquisition, with a small bump to 175m for synergies. Other assumptions include IRD is also worth 175m,   and that Wilan worth 6 x 30m Ebitda or 180m and no further adjustment re Apple case.

My rough calculations indicate the stock market may be under-valuing QTRH by about 55c per share.

Any one caring to read through should check for any errors and any faulty assumptions.

Recent acquisition cost 150, but say             175
Say IRD value is the same                            175
Guesstimate of current excess cash               75
Less Debt                                                      (75)

Total value pre Wilan                                     350

Less 25% market discount to value              ( 87)

Net stock market value pre Wilan                  263

Per share (using just 116m shares)               $2.27/ share

Current share price                                        $2.85/ share

Implied stock market value of Wilan           58c/ share or 69.6m
 
Stock market’s possible excessive discount of Wilan/ QTRH

Stock market implied total value of Wilan        69.6

Guesstimate of Wilan Value  (6X30 Ebitda)   180

Excess Discount                                             110.4

25% appropriate discount on 180                     47

Excessive discount by market                         63.4

Excessive Discount Per share                     54.6c

[cabbieJBJ]

Good exercise shareholders. A few observations: 1. I believe the excess cash, once Q3 is announced in a couple of weeks, could be +$30M to $50M higher on the back of the Motorola license. 2. There are 113M shares outstanding. 3. How did you come to the 25% discount on ITS? These items likely make the Wilan value zero, or close to it.

[shareholders1]

Excess cash - Wilan needs a certain amount of cash to litigate - similar to a company needing inventory or working capital to operate/ Shares OS - I took off the bank site, which is not always up to date, but if use 113m, there are options and Share rights plans that mean effective share dilution, so 116m may be a bit low. Discount of 25% - often companies are acquired for a 30 to 33% premium to

[Justhalffull]

Not a chance on this little blue planet that they will generate $30 to $50 additional cash in q3.  They have had negative cf for both Q1 and Q2.  To have that much change from the motorola deal woulda make it material, and they have never announced it as such.  The license was for connectivity to a receptive wireless internet.  Likely worth less than $10 million.

[shareholders1]

Justhalfful - I had given up, but will try one more time. Are Rogers or BCE's quarterly earnings material? I say yes, as that they represent anout 25% of annual profit. Do they regularly preannounce each quarter? No.  And even if their results were unusually good, I believe the current interpretation of "material change" is that it only refers to changes in the business

[Justhalffull]

Well then you obviously have no idea what timely disclosure is.  Below is the link to the TSX policy 3.3, which lists requirements to maintain your TSX listing.  In particular read paragraphs 3.8(j) and 3.8 (k).  I have never said they have to disclose their quarterly earnings as material, erroneously state.  But just for the record, they DO have to report their quarterly

[cabbieJBJ]

1/2full, QTRH has announced that the fiscal 2021 licensing business will perform in line with the prior year, except for extraordinary events like resolution of the Apple litigation. That means QTRH needs ~$45M in Q3 and Q4. I stick by my number.

[Justhalffull]

You said $30 to $50 million for Q3. Q 3 is done, and no Apple and minor Motorola.  Access to receptive wireless internet?  Come on.  Hundreds of companies have that.  It's peanuts.  Legals will eat up the revenue.

[cabbieJBJ]

We'll see in three weeks. Be patient grasshopper.

[shareholders1]

Justhalfful - responding to your comment :  "They have to disclose when the change is a significant deviation from their norms.  So for a company with negative cash flow in both q1 and Q2, totalling $5.2 million to suddenly have a positive cash flow of $30 to $50 million in Q3 would be material.  They did not disclose it, so I will presume it is less than that, and not material

[Justhalffull]

You failed to include one sentence that I iincludedl,   "so try to comprehend".  Obviously beyond your feeble mind.  I was not quoting the regulation.   But if you think that a company can have a quarter of earnings 4 or 5 times their normal earnings, yet not disclose the fact in a timely manner, then I guess you will have to live with that erroneous belief

[cabbieJBJ]

1/2full, what is normal? Is covid impacted H1 of $10M or is annual ~$60M? The company advised the latter at the Q2 call. The company includes thus perspective on their presentations. You're obviously a short term investor. You said you sold because your view is that Q3 will disappoint. I understand that. Now be quiet; everyone has heard you. In 3 weeks everyone will be able to assess their

[shareholders1]

Justhalful wrote : "You failed to include one sentence that I iincludedl,   "so try to comprehend".  Obviously beyond your feeble mind.  I was not quoting the regulation.   But if you think that a company can have a quarter of earnings 4 or 5 times their normal earnings, yet not disclose the fact in a timely manner, then I guess you will have to live

[Jimmycash]

For a company like Wi-Lan that had revenues around 100M the last 2 years and Quarterhill as a whole having average revenues of 140M for the past several years....seems obvious to me that after YTD revenues being under 40M, a 50M - 60M quarter would not be material at all, just bs as usual. Not sure if you can comprehend that. Half full ....go hug a dog or something......

[v_guerriero]

This is garbage analysis. Todd Coupland values QTRH on an ITS only basis and cash at 2.77.  This was pre-Motorola, PSMC, auto wireless license, etc. In his note, he highlights that the market ascribes NO value to WiLan.  Even if you think Motorola is only worth $10M (which it isn't), the market still values WiLan at ZERO. These guys tried to time the market.  Yes, the

[cabbieJBJ]

I expect one or two positive news events before the release of the Q3 results in early November.