Stingray: from Taking Over Newcap to Takeover Target

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Stingray: from Taking Over Newcap to Takeover Target

Postby jon » Sat Aug 04, 2018 12:17 pm

Five Canadian stocks that could be the next big takeover target
Financial Post
August 3, 2018
12:48 PM EDT ... ver-target

There has been lots of takeover action in the Canadian small/mid cap space over the past two weeks. We have had a privatization offer for AGT Food Ingredients, a Brookfield takeover of Enercare, and the near-daily overtures towards Aimia Inc. So, that got us thinking, what other takeover candidates are out there? Let’s take a look at five companies that might be in an acquirer’s sights one day, either for valuation or strategic reasons.

#2 - Stingray Digital (RAY.A on TSX)

RAY trades at 13 times’ forward earnings, a low valuation despite having a decent balance sheet and solid growth prospects. Earnings per share are expected to double this year. Revenue has grown every year since 2013. Insiders have been net buyers this year. It is a bit of a misunderstood company. It provides music and media services to 400 million customers in 156 countries. As the music industry transforms, one of the other huge music companies might one day be interested in expanding its own offerings by buying Stingray. Stingray itself just made a big acquisition of Newfoundland Capital, getting it into the broadcast radio market.

Takeovers are notoriously difficult to call. One reason we like the five above is that they are all decent companies anyway, regardless of any potential merger activity. If a takeover happens, you will get a ‘faster’ investment return, but over time we think the shares of these companies are likely to do well enough on their own, anyway.

Peter Hodson, CFA, is Founder and Head of Research of 5i Research Inc., an independent research network providing conflict-free advice to individual investors.
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