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Earlier this week, troubled ATS Automation Tooling Systems Inc. (OTCPK:ATSAF) reported stronger-than-expected EBITDA for its automation systems group in its fourth quarter results, along with stronger-than-expected sales in its solar operations. While Scotia Capital analyst David Tyerman says in a note to clients that he is restricted on commenting too much on the stock – Scotia has been retained to provide advice with respect to its precision components group, as the firm is in negotiations to sell the key its operating assets and liabilities – what he will say that the turnarounds at the ATS and solar operations are “progressing more rapidly than we expected.”

At the ASG group, Mr. Tyerman says margins were boosted by headcount reductions and other improvements, along with a C$27 million order from a large solar company. Sales in the solar division were boosted by C$9.1 million in system sales, and EBITDA has much improved due to efficiency improvements.

Mr. Tyerman also says in his note that while ATS still intends to establish its solar operations as a standalone comapny, "there are too many unknowns to reliably predict" when this would happen. Much depends on the Solar division achieving higher cell efficiencies and better plant productivity.

The analyst says his “blue sky” analysis of the company suggests upside potential on the stock, to C$15, “if new management can execute a strong turnaround.” However, he notes that "management has cautioned that the ASG turnaround will take time," and will likely involve a multi-year process.

Source: ATS Automation: Strong Q4 Results Reflect Upside in Systems and Solar Groups