CalAmp Update Target price $28

MP : NASDAQ : US$16.50
BUY 
Target: US$28.00

COMPANY DESCRIPTION:
CalAmp supplies tightly integrated M2M hardware with its
COLT M2M Application Enablement Platform (AEP) cloud
to add cellular and GPS connectivity solutions into
several M2M verticals including: fleet management,
asset/trailer tracking, vehicle finance/recovery/remote
start, rail, and smart energy. In its legacy business,
CalAmp supplies outdoor reception/amplification and
indoor network products for DBS satellite TV application

Technology — Communications Technology — Wireless Equipment
SOLID Q2/F’15 RESULTS AND H2/F’15 GUIDANCE
Investment recommendation:

 

CalAmp reported solid Q2/F2015 results, with
sales consistent with and pro forma EPS above our estimates. Consistent
with our expectations for stronger H2/F2015 Wireless DatacCom sales
versus H1/F2015 levels, CalAmp issued H2/F2015 guidance basically
consistent with our estimates. We believe CalAmp’s Wireless DataCom
business is well positioned to drive strong H2/F2015 and F2016 sales and
earnings growth trends driven by strong initial sales to Caterpillar that
started in September, growing insurance telematics opportunities, improving
international sales, increasing product offerings and customers in the
pipeline, and anticipated steady growth of higher-margin recurring revenue
sales. We maintain our BUY rating and $28 price target.
Investment highlights
 Q2/F’15 sales of $59.2M were consistent with our $59.2M estimate, with
CalAmp reporting Wireless DataCom sales of $50.2M and Satellite
division sales of $9.0M versus our $50.9M/$8.4M estimates. Stronger
gross margin and slightly lower operating expenses resulted in pro
forma EPS of $0.21 versus our $0.18 estimate.
 Q3/F’15 guidance of $63M in revenue and pro forma EPS of $0.23 at the
range midpoints were slightly below our $65.7M/ $0.25 estimates.
However, full-year F2015 were in line with our estimates. Consistent
with our expectations for stronger overall H2/F’15 trends due to strong
initial sales to Caterpillar ($10M+ in H2/F’15E), solid core MRM trends
with international growth and steady UBI hardware sales, management
guided F2015 sales of $253M and pro forma EPS of $0.91 at the range
mid-points. This guidance was basically consistent with our
$256M/$0.91 estimate. We anticipate the strong H2/F’15 trends should
create a foundation to drive steady long-term sales and earnings growth
in F2016 and beyond.
 With H2/F2015 guidance basically consistent with our estimates, we
maintain our F2015 pro-forma EPS estimate of $0.91 and slightly
increase our F2016 pro forma EPS estimate from $1.11 to $1.12.
Valuation:

Our $28 price target is based on shares trading at roughly
25x our F2016 pro forma EPS estimate.

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