Pivot Technology Solutions (PTG)

[junkHustler]

Pivot Technology Solutions (PTG.V:$0.54)

We were recently combing around looking for new ideas in the tech space and also trying to ascertain what sort of value there is in the market.

As part of this process, we did various screens on the S&P/TSX Venture index, with a focus on those names in the technology sector. Pivot Technology Solutions immediately jumped out at us. As we looked at the numbers we asked ourselves, “what is this company with C$1.5 billion in revenue and why the heck does it only have a market cap C$90 million?”

The more we dove into the Pivot story, the more attractive it became. These are typically the stories that work out well.

In short, Pivot Technology Solutions is a value-added reseller that was formed through the acquisition of various companies focused on server hardware and enterprise storage. The company is positioned to benefit from the evolution in mobile, enterprise computing, big data and a switch to cloud based business models.

Doing our own legwork, in conjunction with an excellent report from Cantor Fitzgerald in Canada, we discovered some very attractive elements to the Pivot Technologies story. A brief snapshot of some of the highlights are:

- Pivot was founded by John Sculley, the former CEO at Apple and prior President of PepsiCo. He is the current Chairman and a major shareholder.

- The company has revenues of $1.5Bil and close to $40Mil in EBITDA and a market cap of only $90Mil.

- Pivot has close to 2,000 underlying customers, many of those are well-known fortune 100 companies.

- The company has a low margin business, but its profitability is stable and it is expected to have very low ongoing capex requirements.

- PTG.V is expected to pay a dividend of $.03 per share beginning in August 2015, which equates to a current yield of ~5.5% per annum.

- The company has initiated a normal course issuer bid (or share buyback program), of up to 10% of the company’s public float.

- Pivot currently trades at an EV/EBITDA of 5.1X and P/E of 39X. This is quite conservative to its peer group based on our calculations.

We believe Pivot technologies is a standout story. It is rare to find a company of this caliber employing a meager $90 million market cap. There are many tech companies in Canada with this type of valuation that have yet to make a dime. The company is generating a healthy stream of cash flow which is being utilized to the benefit of shareholders in the form of an excellent dividend yield and share buyback program.

Please note, with all of the names mentioned above, they are high risk investments. The majority of early stage technology companies fail and the names mentioned above should be looked at in that light. We only provided a brief summary of the companies above. If you are looking to invest, you need to do a significant amount of your own due diligence.

http://www.verdmontlive.com.pa/2015/06/verdmont-capital-preferred-canadian.html