Q: Hi 5i Team, could you comment on the likelihood of Evertz Technologies being a takeover target in the near future. I have this as a small loss in a TFSA and trying to decide if I should continue to hold for the dividend or sell for a potentially higher growth stock. Any replacement suggestions welcomed.
5i Research Answer:
Honestly we thought it would have been acquired years ago. The industry has gone through lots of consolidation, and we would still consider it a 'potential' target. With its haphazard history, it is not likely to see a giant valuation multiple increase (unless it becomes more consistent). The stock at 15X earnings is cheaper than many larger companies that might be interested. It has net cash, and a privatization would save $60M a year in dividends that could be used to fuel more growth. But, with 65% held by insiders, there won't be a sale unless insiders desire one, and this has not been seen likely. We think CLS or DSG would be good growth replacements.