Keep the faith. All the negatives and overhangs have passed and good times are set for Pivot Technology Solutions, an information technology services provider that reported its annual financial results this week, a couple of months after a rather unusual takeover offer from a group of insiders was rebuffed.
That’s the word from Ralph Garcea, the only analyst who covers Pivot. Garcea works for Cantor Fitzgerald and this week issued a note lauding Pivot’s fourth quarter financials.
Garcea, who in the heat of the battle for the planned insider takeover of Pivot called for an auction as a better way to generate value for the shareholders, added he expected “the rest of the year to have plenty of growth catalysts.”
Shareholder opposition causes Pivot Technology Solutions to back away from going privateAnother demand for Pivot to conduct auction as opposition to share conversion deal mounts
He then reaffirmed his buy rating and his one-year price target of $1.50 a share — a combination he has had for the past six months. Garcea added Pivot’s fourth quarter results were its highest quarterly revenue as a public company. The company generates about US$1.5 billion in annual revenue.
Scott Gardner, founder of Torrent Capital and the shareholder most opposed to the proposed insider takeover, termed the results “spectacular. It’s confirmation Pivot is just hitting its stride,” he said noting the outlook is helped because management “is taking the necessary steps to restore confidence in the market that the company will be acting in the common shareholders best interest moving forward.”
Gardner added that Torrent has added to its ownership and feels Pivot would benefit by moving to a better stock exchange that’s “more reflective of its fundamentals.”
But at least one shareholder is less than pleased with the performance of Pivot’s share price since the controversial insider plan was withdrawn.
The displeasure: After the insider bid was withdrawn and after the dividend was hiked, the shares have fallen by about 20 per cent. “Cantor Fitzgerald and Torrent have wildly overvalued this company. Cantor called for an auction. Well there’s one going on every day on the TSX Venture, and it’s saying the company isn’t worth anything close to Cantor’s ridiculous target of $1.50,” he declared.
The shares closed Friday at 41.5 cents.
Cantor Fitzgerald’s Garcea disagrees and said “the cash flows warrant a price in the $1-$1.50 range.” The catalysts Garcea sees for a positive 2016 include:
The announced share-buy back (at the end of March, Pivot received approval to buyback and cancel 5 per cent of its issued shares, a plan that is expected to be activated late next month);
A focus on growth, in part the result of naming Kevin Shank as its new chief executive. (Prior to this Garcea said integrating a slew of acquisitions was the priority.) Shank who joined Pivot last year, officially fills the new role on Sunday, the same day that Pivot’s new chief financial officer moves in. Garcea believes Pivot health care and financial services are two possible new growth areas;
The removal of the overhang on the stock. Garcea said that some outstanding broker warrants (exercisable at $0.40 a share) tended to keep the price lower than otherwise. In the middle of March, 2016, Pivot said almost 2.931 million unexercised broker compensation warrants – in connection with a debt financing five years back — expired.
“Now it’s going to trade on its fundamentals and the patient equity shareholders will be rewarded,” said Garcea, who can foresee a higher dividend. “Later in the year I think you’ll see another dividend increase.”