Data Communications Management Corp. (DCM:TSX; DCMDF:OTCQX) garnered a more than 50% increase in its target price, to CA$6.90 per share from CA$4.50, by eResearch following value-adding events, reported analyst Chris Thompson in a June 14 research update note.
Based in Ontario, Canada, Data Communications provides businesses with conventional print options, digital asset management and tech-enabled marketing workflow.
Greater possible gain
The higher target price means greater potential return on investment. Given Data Communications is currently trading at CA$2.91 per share, noted Thompson, the updated possible gain is a compelling 137%.
The company remains a Buy.
In his report Thompson presented the five developments occurring between March 21 and June 8 of this year, which collectively raised eResearch's valuation of Data Communications Management. They are, from most recent to oldest:
Generation of capital
1) Completion of the sale and leaseback of the Oshawa, Ontario, warehouse facility it inherited as part of the acquisition of MCC, the Canadian operations of R.R. Donnelley & Sons. Data Communications intends to use the building to serve its clients in eastern Canada.
The transaction generated CA$23.1 million (CA$23.1M), Thompson wrote, and was an important step in Data Communications paying down the CA$30M term loan also gained with the MCC merger.
2) Closing of a private placement offering that generated CA$26.1M in gross proceeds.
This financing, Thompson indicated, will help Data Communications bolster its balance sheet, reduce its debt, cover merger-associated costs and invest in its growth strategy.
The newest numbers
3) Release of Q1/23 financial data.
Thompson reported that Data Communications' Q1/23 revenue, CA$76.1M, was up YOY and exceeded eResearch's estimate. Gross margin, 31.1%, also was higher than last year but lower than eResearch's forecast.
The company reported a loss for the quarter of CA$2.4M. EPS was (CA$0.06).
As of March 31, 2023, cash on hand was CA$3M and debt was CA$22.3M.
Opportunity to expand
4) Completion of the acquisition of, for CA$130.8M.
This important milestone should result in many beneficial synergies, Thompson noted.
He added that "this transaction enhances Data Communication Management's capabilities and growth potential. MCC has a highly complementary operating model and is expected to add new products, services and technology capabilities."
Performance last year
5) Release of Q4/22 and full-year 2022 (FY22) financial results.
Thompson pointed out that in Q4/22, the company's revenue, CA$73M, and gross margin, 32.2%, were up year over year (YOY) and exceeded eResearch's estimates. Diluted earnings per share (EPS) was CA$0.08.
Similarly, for FY22, revenue, CA$273.8M, and gross margin, 30.8%, were up YOY. Diluted EPS was CA$0.30.
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