Descartes Infodis deal minor, but can build AsiaPac business, says Shuttleworth

M Partners analyst Ron Shuttleworth believes the Infodis acquisition is an inexpensive way for Descartes to improve its Asia Pacific presence, a place where it has almost no footprint.

Descartes Systems Group (TSX:DSG) yesterday announced it had struck a deal to acquire Infodis BV, a Netherlands-based provider of transportation management software. Descartes will pay three million euros (approximately US $3.7-million) for the company.

Management says that “more than 200 carriers in Europe and Asia and some of the world’s leading high-tech companies will be connected to Descartes’s logistics technology platform, where more than 35,000 trading partners connect and collaborate to improve logistics operations. ”

M Partners analyst Ron Shuttleworth says that considering Descartes had nearly $70-million in cash at the end of Q1, 2013, this is a relatively minor “tuck-under”acquisition. The M Partners analyst does, however, believe the deal is an inexpensive way for Descartes to add Asia Pacific customers, a place where it has almost no footprint. In a research update to clients today, Shuttleworth maintained his BUY recommendation and our twelve-month share price target of $12.00 on Descartes.

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After nearly becoming a dot-bomb casualty, former Gartner analyst Art Mesher rescued Descartes, which he estimated was days away from folding. The company has since become a leader in global logistics technology; solutions that help its customers make and receive shipments.

Descartes now finds itself at the cutting edge of a trend; across the globe governments are looking to untangle and standardize their logistics operations. An increasing amount of evidence suggests a clear link between logistics performance and economics growth. The World Bank’s Logistics Performance Index showed that low and middle income countries such as Brazil and Columbia have given their economies a shot in the arm through improved logistics, while other emerging economies, such as Turkey, have been hurt by a lack of logistics infrastructure.

Descartes revenue, meanwhile, has grown from $66-million in fiscal 2009 to nearly $114-million in 2012.

Shuttleworth says that of Infodis’ 250 customers, the majority do business on European and Asia Pacific trade routes. With only 6% of its business from Asia Pacific, the M Partners analyst believes Descartes can use the deal as a foothold to build a bigger presence in the area.

Shares of Descartes Systems Group on the TSX closed today up .4% to $8.25.

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