TOP IDEAS: Intrinsyc Technologies' (TSX: ITC) revenues
and EBITDA for 2018 set new record highs. For 2019, M&A activity could be a
stock price catalyst.
Investorfile’s share price accumulation target of
$1.20 for Intrinsyc Technologies Corp. was reached on March 21, 2016. For the
record, we do not revise share price targets for our Investorfile Top Ideas –
Small Cap Value Stocks. We have positioned our blog to be one of the first providers
of a pragmatic perspective of a small cap company stock's potential worth,
where there may be uncovered value that has been largely overlooked by the
In our last blog post about Intrinsyc Technologies
Inc. (TSX: ITC – C$1.41) nine months ago, Investorfile went on the record,
forecasting that the Company could experience strong growth in 2018 (See: Intrinsyc
Technologies is on pace for record results, making it a buy today).
Based on the Company’s 2018 annual financials, we were right!
Intrinsyc Technologies had impressive results
year-over-year in 2018. The Company reported a significant jump in revenues,
growing 24%, setting a new annual record at US$25.7 million. With the revenue
growth came record annual EBITDA of US$1.9 million. The results were fueled by 33% revenue growth from the sales of
the Company’s embedded computing modules. Intrinsyc’s computing modules
are sold on a repeat basis to companies building a variety of Internet of
Things (IoT) products that require advanced intelligence and connectivity.
The Company reports all of its financial results in US currency.
For small cap investors who are unfamiliar with
Intrinsyc Technologies Corp., the Company provides solutions that span a
product's development life cycle from concept to production. Intrinsyc services
high–tech device makers (original equipment manufacturers – OEMs) with the
ability to offer differentiated products with faster time to market. As
a Qualcomm licensee, Intrinsyc designs proprietary computer modules with
Qualcomm processors. The Intrinsyc computer modules become the embedded systems
that drive the dedicated functions for new high-tech products in markets
including the Internet of Things, smart phones and tablets, drones and
robotics, wearable security cameras, in-flight entertainment, auto console
computers, plus many more.
It is important to know that Intrinsyc Technologies
has a revenue model that derives sales from proprietary computer modules and
development kits, as well as high-margin engineering services related to those
modules and kits for an OEM product development program. As its OEM customers’
new products gain market acceptance, Intrinsyc shares in the commercial success
by earning recurring revenues from computer modules sales and/or design
royalties in correlation with the production ramp-up over the lifetime of new
Investorfile is of the view that the biggest potential
catalyst for the stock price of Intrinsyc Technologies in 2019 may be the
result of Merger and Acquisition (M&A) activity. We note in the most
recently updated investor presentation posted on Intrinsyc’s website that its
growth strategy more definitely includes M&A activity. The Company says it
is seeking M&A opportunities that add complementary products, improve
buying power and margins, provide cross-selling potential and add geographic expansion.
With M&A activity, Intrinsyc anticipates that an increase in the Company’s
size will attract new and institutional investors. Of note, last month
Intrinsyc Technologies announced that it has engaged US-based Roth Capital
Partners LLC as a financial adviser, with a mandate to accelerate strategic
growth opportunities for the Company.
We are of the opinion that Intrinsyc Technologies
(being debt-free with cash) has the financial capacity at the moment to acquire
or merge with a target company that could add anywhere between US$15-25 million
in annual revenues, potentially doubling the size of the Company. We also
believe that certain acquisition/merger targets in the USA could offer
a "back door” listing opportunity for Intrinsyc Technologies’ stock on the NASDAQ
exchange, which could have significant impact on the market valuation and
liquidity of the Company’s shares.
That said, Investorfile continues to have a positive
view of the future prospects of Intrinsyc Technologies as one of our
long-standing Top Ideas. We first recommended this stock when it was trading at
C$0.75 (See: Intrinsyc
Technologies: A high-tech turnaround play, for small cap value investors).
Echelon Wealth Partners provides research coverage on
Intrinsyc Technologies and they just raised their 12-month target price on the
stock to C$2.75.
Intrinsyc Technologies currently has about 20.1
million shares outstanding. Over the past 12 months the Company has bought back
and cancelled over 1 million of its issued shares.
Company Website: www.intrinsyc.com
Author’s share ownership disclosure: ITC - Yes
article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
is not engaged in an investor relations agreement with Intrinsyc Technologies
Corporation nor has it received any
compensation from Intrinsyc Technologies Corporation for
the preparation or distribution of this article.
author of this article has acquired and may trade shares of Intrinsyc Technologies
Corporation through open market
transactions and for investment purposes only.