Wi-LAN Inc. (WIN : TSX : C$5.28) - Buy - Target:C$7.50 *** Q3/F12 preview; maintaining BUY rating and C$7.50 target
Investment recommendation We are maintaining our BUY rating and target price of C$7.50 in advance of WiLAN's Q3/F12 results scheduled to be released before the markets open on November 6. Due to a lack of licensing announcements since the end of FQ2, we have decided to slightly reduce our top line estimates in FQ3 and FQ4, while keeping our F2013 estimates intact. We continue to believe that the recent acquisition of the 4G patent portfolio from Alvarion and new litigations will strengthen WiLAN's licensing position, and could potentially lead to early out-of-court settlements with various parties. Entering F2013, we continue to believe that WiLAN's 3GPP litigation and potential settlements in advance of the April 2013 trial date will be a significant catalyst for the shares and the company's growth in the early part of the year. Investment highlights For Q3/F12, we have lowered our revenue estimate by US$400k to US$21.2 million with no impact on adjusted EPS at US$0.08, in line with
consensus. For Q4/F12, we have reduced our revenue estimate by US$2.1 million to US$22.9 million and adjusted EPS by 2 cents to US$0.08. WiLAN initiated digital TV and display related litigations against LG and Toshiba in the Southern District of Florida. WiLAN dismissed any material impacts by Hon Hai's countersuit on WiLAN's V-Chip patent. Valuation Our 12-month target price is based on a DCF model and 20.8x FTM P/E, or 15x F2013E adjusted EPS, in line with the peer average.