Why I Think This 100% Winner Still Has Room to Run
27% Royalty Growth, 52% Margins, 10% FCF Yield
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A small Canadian company has quietly transformed from struggling hardware business to high-margin licensing platform.
The reaction?
Complete silence.
Zero analyst coverage. No institutional following. Total indifference from the investment community.
But here's what I think they're missing:
This isn't just another turnaround story.
This is a recurring revenue transformation hiding inside a microcap that nobody understands.
This is a 20-year-old business with:
Royalty revenue growing 27% annually to record CA$11M
52% gross margins (up from 47% prior year)
Net cash position of CA$7.8M with CA$16M available liquidity
Management successfully pivoted from hardware to high-margin licensing
Over 1,100 global installations creating network effects
Three growing verticals: cinema, sim racing, and training simulation
Recurring royalties now comprising 26% of total revenue
The setup looks compelling to me.
Take a profitable technology company, give them a fortress balance sheet, add management that's transforming the business model from hardware to licensing, and you get growing recurring revenue.
But here's what I find particularly interesting: this business is currently trading at around FCF/EV Yeild of 9.81%!
The Multibagger Checklist:
Here's how I see this business measuring up:
✓ Small Size with Room to Grow: At CA$66M market cap, there's plenty of runway.
✓ Improving Profitability: Gross margins improved to 52% in FY2025 from 47% prior year. I think the shift toward higher-margin royalties is working.
✓ Management Execution: Leadership executed a turnaround from losses to CA$3.86M net profit in FY2025. The strategic pivot to licensing is showing results.
✓ Recurring Revenue Growth: Royalties grew 27% to a record CA$11M, now 26% of total revenue. Each installation creates ongoing licensing opportunities.
✓ Established Technology Platform: Over 1,100 installations globally. 20+ years of technology development and market presence.
✓ Financial Stability: Net cash position of CA$7.8M with CA$16M available liquidity. Zero debt.
So what exactly is this business?
And why do I think this valuation disconnect exists?