The technology sector has been a leading sector in the S&P/TSX Composite Index in the first half of 2013 with the large cap S&P/TSX Information Technology Index up 18.6% benefitting from CGI Group (up 34.3%), Open Text (up 29.3%) and Macdonald Dettwiler (up 24.7%). The mid-market Veracap Technology Index ("VTI")1 was even stronger delivering an increase of 27.8% benefitting from such high fliers as Points International Ltd. (up 106.4%), Vuzix Corporation (up 90.8%), Solium Capital Inc. (up 90.2%) and C-Com Satellite Systems Inc. (up 86.4%)2. The broad S&P/TSX Composite Index was held back by lagging sectors such as Materials, Income Trusts and Utilities resulting in a return of negative 2.5% for the first half of 2013.
Technology sector valuation multiples (enterprise value divided by LTM EBITDA)3 continued to improve to 9.5 times while the S&P/TSX average EBITDA multiple declined to 8.9 times. The strongest subsector, in terms of valuation multiples, was the Internet Software and Services subsector where companies such as Mediagrif Interactive Technologies Inc., Tucows Inc. and Bluedrop Performance Learning Inc. contributed to an average subsector LTM EBITDA multiple of 14.7. The Communication Technology subsector brought up the rear with companies such as Advent Wireless Inc., Aastra Technologies Ltd., International Datacasting Corporation and Axia NetMedia Corporation trading below five times LTM EBITDA.
Footnotes
1 The VTI includes all technology sector companies trading on the TSX and TSX-V with a market capitalization between $10 million and $500 million. As at July 1, 2013 this included 64 companies.
2 For share prices greater than $1.00.
3 see www.veracap.com/blog/2011/06/ for terms definition.
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