QTRH.TO - Quarterhill

[sculpin]

Quarterhill – I’ve been accumulating this over past few weeks as a tax loss buying opportunity.  Quarterhill's valuation at the current price level is well supported by cash and positions in 2 private tech companies with a division that is received essentially for free but has the potential to result in cash flows to the Company that are multiples of the current share price.

 

Previously Company was called Wi-Lan but that is now just the name of its patent subsidiary - QTRH is another SOTP story. An orphaned tech/patent troll company that has become a poorly understood IOT conglomerate with the purchase of Intl Road Dynamics and Viziya last year.

 

Patent business brings in lumpy cash payments with latest court victory against Apple for $145 million US that the market has discounted to $0.

 

Quarterly reporting over the last year has in general disappointed the Street due to much lower revenues from patent litigation.

 

Pays a quarterly dividend of $0.0125.

 

New CEO brought in last year to carry out the roll up of IOT businesses. Doug Parker was previously SVP, Corporate Development at Open Text, leading a corporate development team of >20 professionals. Collectively, the Quarterhill deal team has completed >100 transactions cumulatively valued at >$5 B.

 

Valuation

 

Shares currently trade at $1.26 Cdn (QTRH – TSX) with a market cap of $150mm with 119mm shares O/S. The Company’s share price has hit an all time low in the past week and was as high as $2.44 earlier in 2018.

 

Assets….

 

Cash –$0.69/share

 

IRD position –$0.70/share – valued at cost

 

Viziya position — $0.45 – valued at cost

 

Total cash & IOT investments — $1.84 Cdn per share

 

At current price of $1.26 the market is valuing the Wi-Lan subsidiary at a negative value. Even assuming IRD & Viziya are only worth half of what they were purchased for still ascribes a value of $1.26 per QTRH share and nothing for Wi-Lan.

 

Wi-Lan

 

Between 2010 and 2015 Wi-Lan spent a total of $162mm US acquiring patents. Major components of its patent portfolio include IP related wireless tech (LTE, 3G, 4G) network access, semiconductors, display technology & content delivery. Has recently switched to partnering with IP owners instead of just outright patent acquisitions. Management estimates that its current portfolio, as well as IP managed on behalf of third parties, has the potential to yield $750mm US over time.

 

Things I don’t like about QTRH…

 

Skinny management & board ownership

Communication to shareholders is fairly poor with patent settlements cloaked in secrecy

Annual cost to run the business (public co & Wi-Lan) is high

 

Coverage

 

Favourite of Benj Gallandar of Contra the Heard with his purchases much higher in price

 

https://www.bnnbloomberg.ca/benj-gallander-s-top-picks-dec-24-2018-1.1187881?spUserID=MjQ3MTk5MjkzMTYS1&spJobID=1364435292&spReportId=MTM2NDQzNTI5MgS2&spMailingID=24161492

 

CIBC, Cormark & Paradigm cover it

Attached CIBC latest pdf

QTRH2.pdf

[sculpin]

Stockhouse chatter has judge passing decision upholding all of Wi-Lan’s claims but retrial for settlement damages if they don’t come to their own settlement on Jan 14th…

 

Apple found GUILTY on infringing Wilan patents

Even the retrial may be avoided. The court has asked Apple and Wilan to meet again and try and work an amount out before proceeding with the re-triall:

 

“orders the parties to appear for a settlement conference before Judge Major on January 14, 2019, at 10:30 a.m.

 

 

Quarterhill's WiLAN awarded $145.1M against Apple

 

 

2018-08-01 20:25 ET - News Release

 

WILAN PROVIDES LITIGATION UPDATE

 

WiLAN Inc., a Quarterhill Inc. company, has provided an update on continuing litigation.

 

In a trial verdict rendered on Aug. 1, 2018, in the U.S. District Court for the Southern District of California, a jury awarded WiLAN $145.1-million in damages against Apple Inc. for infringement of WiLAN's U.S. patent No. 8,457,145 and 8,537,757.

 

About Quarterhill Inc.

 

Quarterhill is focused on the disciplined acquisition, management and growth of companies in dedicated technology areas, including: vertical market software and solutions, intelligent industrial systems, and innovation and licensing. Quarterhill's emphasis is on seeking out acquisition opportunities at reasonable valuations that provide a foundation for recurring revenues, predictable cash flows and margins, profitable growth, intimate customer relationships, and dedicated management teams.

[Cardboard]

Fairfax bought 800,000 shares of this in the 4th quarter or 0.7% of outstanding:

 

https://www.sec.gov/Archives/edgar/data/915191/000110465919008337/xslForm13F_X01/a19-4272_3informationtable.xml

 

I don't know with reporting requirements if it is the entire position or just what was bought on U.S. trading side?

 

It is trading at about half of book value. Hard to say what will come out exactly from Apple litigation but, it is certainly not $0.

 

Cardboard

[Cardboard]

Posted the Fairfax news 2 seconds ahead of you man! LOL!

 

By the way, Benj is back on BNN at lunch today and will surely be asked by some viewer about it and that is unless he makes it a top pick again. He has good following so it has a big impact on these small caps.