Mogo still has upside, says Mackie Research

Mogo’s Feller brothers with investor Michael Wekerle.

It’s been one of the best performing stocks on the TSX this year, but Mackie Research Capital analyst Nikhil Thadani thinks there is still room to make money on Mogo (TSX:MOGO).

Yesterday, Mogo announced that it had closed its previously announced debenture offering that raised it a total of $15-million.

Thadani says this financing will supports Mogo’s ability to grow its gross loan book to more than $125-130-million through 2018 vs.
its current level of approximately $70-million. The analyst says Mogo still looks cheap compared to its peers.

“We believe improving valuation driven by H2/17 revenue growth could drive additional gains,” he says. “On a 2018 basis, Mogo trades at ~2.1x net sales vs. FinTech names at an average ~3.9x. High growth Canadian tech names trade at higher revenue multiples. We exclude funding debt (i.e. credit facilities to fund loan book including yesterday’s $15 mln debt raise) from net debt and account for loan book interest revenue net of funding interest expenses. Our $6/sh target implies ~2.7x 2018 net sales – with bias to the upside on revenue growth execution.”

In a research update to clients today, Thadani resumed coverage of Mogo with a “Speculative Buy” rating and one-year price target of $6.00, implying a return of 39 per cent at the time of publication.

Thadani thinks Mogo will post EBITDA of $600,000 on revenue of $47.6-million in fiscal 2017. He expects those numbers will improve to EBITDA of $8.3-million on a topline of $69.6-million the following year.

Disclosure: Mogo is an annual sponsor of Cantech Letter and editor Nick Waddell owns shares of the company.