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 a 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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Important Disclosures:
- Data Communications Management Corp. is a billboard sponsor(s) of Streetwise Reports and has paid SWR a sponsorship fee between US$3,000 and US$5,000.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for eResearch, Data Communications Management Corp., June 14, 2023
eResearch Intellectual Property: No representations, express or implied, are made by eResearch as to the accuracy, completeness, or correctness of the comments made in this report. This report is not an offer to sell or a solicitation to buy any security of the Company. Neither eResearch nor any person employed by eResearch accepts any liability whatsoever for any direct or indirect loss resulting from any use of this report or the information it contains. This report may not be reproduced, distributed, or published without the express permission of eResearch.
ANALYST ACCREDITATION eResearch Analyst on this Report: Chris Thompson CFA, MBA, P.Eng. Analyst Affirmation: I, Chris Thompson, hereby state that, at the time of issuance of this research report, I do not own common shares, share options, or share warrants of DATA Communications Management Corp. (TSX: DCM).
eRESEARCH DISCLOSURE STATEMENT eResearch is engaged solely in the provision of equity research to the investment community. eResearch provides published research and analysis to its Subscribers on its website (www.eresearch.com), and to the general investing public through its extensive electronic distribution network and newswire agencies. eResearch makes all reasonable efforts to distribute research material simultaneously to all of its Subscribers. eResearch does not manage money or trade with the general public, provides full disclosure of all fee arrangements, and adheres to the strict application of its Best Practices Guidelines. eResearch accepts fees from the companies it researches (the “Covered Companies”) and from financial institutions or other third parties.
The purpose of this policy is to defray the cost of researching small and medium-capitalization stocks which otherwise receive little or no research coverage. DATA Communications Management Corp. paid eResearch a fee to have it conduct research and publish reports on the Company for one year. To ensure complete independence and editorial control over its research, eResearch follows certain business practices and compliance procedures. For instance, fees from Covered Companies are due and payable before the research starts. Management of the Covered Companies is sent copies, in draft form without a Recommendation or a Target Price, of the Initiating Report and the Update Report before publication to ensure our facts are correct, that we have not misrepresented anything, and have not included any non-public, confidential information.
At no time is management entitled to comment on issues of judgment, including Analyst opinions, viewpoints, or recommendations. All research reports must be approved, before publication, by eResearch’s Director of Research, who is a Chartered Financial Analyst (CFA). All Analysts are required to sign a contract with eResearch before engagement and agree to adhere at all times to the CFA Institute Code of Ethics and Standards of Professional Conduct. eResearch Analysts are compensated on a per-report, per-company basis and not based on his/her recommendations. Analysts are not allowed to accept any fees or other considerations from the companies they cover for eResearch. Officers, analysts, and directors of eResearch are allowed to trade in shares, warrants, convertible securities, or options of any of the Covered Companies only under strict, specified conditions, which restrict trading 30 days before and after a Research Report is published.
