Pacific Trader: Will Tantalus Systems provide a jolt to the utility sector?

Tantalus Systems may be new to the public markets, but it's been working with the power industry for more than three decades.

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Tantalus Systems’ metering and data analytics technology boosts the efficiency and reliability of power grids

The Burnaby software developer helps utilities smarten up their overworked electrical grids

The stock: Like the new kid who arrives at school and promptly gets bumped up a grade, Tantalus Systems Holding (TSX:GRID) is still a bit of an unknown. After listing on the TSX Venture Exchange this past February, the Burnaby software developer graduated to the big board in May, so it doesn’t have much of a track record as a public company (and what little it has is nothing to write home about). But the handful of investment analysts who have got to know Tantalus so far seem impressed. They think the 110-employee firm could really capitalize on the electrical industry’s transition to so-called smart grids.

The drivers: It may be new to the markets, but Tantalus has been working with the power industry for 32 years. Its Q2 earnings release in August marked the 18th consecutive quarter of positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), and it signed up its 200th utility customer in September.

The demands of decarbonization, outages caused by wild weather and electrification of transportation are pushing utilities to make their power generation, transmission and distribution more efficient. Tantalus strives to help meet that need with advanced metering technology and data analytics. With a potential client base of 3,000 utilities in North America and the Caribbean and a 16-percent average annual rise in the number of smart meters deployed over the past nine years, the firm has abundant room for growth.

GRID’s share price of $2.19 on Tuesday—down from its market debut at $3.50 in February—gives it a market capitalization of $95 million. Insider reports show that president and CEO Peter Londa and director Thomas Liston, a technology investor, have been buying small batches of shares on the open market lately.

Word on the street: Canaccord Genuity Group analyst Yuri Lynk initiated coverage this month with a “buy” rating and $2.50 price target, citing Tantalus’s “nearly 100 percent customer retention,” rising margins and strong balance sheet. Currently “underappreciated by investors,” it could become a takeover target, Lynk speculated. 

Coming and going: Bloomberg News reported Tuesday that Vancouver-based Teck Resources (TSX:TECK.A, TECK.B) is mulling a sale or spinoff of its metallurgical coal business, citing unnamed sources. The coal unit would be valued at about $8 billion, the report said. Teck’s total market cap is $16.7 billion. We took a look at the company’s prospects in this space in July.