Kinaxis off to solid start to life as public company, says Cormark

Cormark analyst Richard Tse says Kinaxis is a high quality new public entry in Canada, and everything he sees from the company’s Q2 strengthens his belief that its solid underlying financials are not priced into its stock.

Its first set of results as a public company underscore all the reasons he initiated coverage of Kinaxis (TSX:KXS) earlier this month with a “Buy” rating, says Cormark analyst Richard Tse.

Last Thursday, Kinaxis reported its Q2, 2014 results. The company lost (U.S.) $5.3-million on revenue of $17.9-million, a topline that was up 14% from the same period last year.

CEO Doug Colbeth reflected on he company’s recent IPO.

“The success of our initial public offering underscores the market’s positive view of our unique SaaS (software-as-a-service) offering and the growth potential it represents,” he said. “The complexity and importance of supply chain management in today’s global economy provides us with a large addressable market. Our focus is growing subscription revenues through new customers, verticals and applications to drive cash flow.”

Tse says Kinaxis is a high quality new public entry in Canada, and everything he sees from the company’s Q2 strengthens his belief that its solid underlying financials are not yet priced into its stock. Enterprises are accelerating their move to the cloud and Kinaxis is “positioned at the heart of this enterprise application renaissance”, he says.

The Cormark analyst says he sees a short term investment period for Kinaxis that will result in EBITDA margins in the 20% to 25% range. He believes that the company will do in the SaaS-based supply chain management (SCM) space what Salesforce.com did in the customer relationship management (CRM) space, that is, disrupt is greatly.

In a research update to clients this morning, Tse reiterated his Buy rating and $22.00 one-year target on Kinaxis.