Industrial Alliance raises target on Softchoice to $15.50

Industrial Alliance analyst Al Nagaraj says Softchoice integrated the UNIS Lumin business faster than he expected, and he is doubly impressed that the company delivered in this quarter, which is typically its slowest.Softchoice (TSX:SO) last week announced its Q3,2012 numbers. The company earned $5.5 million on revenue of $243.6M, which was up 7.7% over the same period last year.

CEO David Macdonald said the momentum was partly the result of a recent acquisition.

“Our solid earnings performance reflects our focus on productivity, managing expense growth, and expanding the proportion of high-value solutions and services in our revenue mix,” he said, adding: “Moreover, we are now starting to realize the anticipated synergies of our acquisition of Unis Lumin, which includes leveraging key assets to bring game-changing offerings to market like the successful introduction of Softchoice cloud and keystone managed services.”

Industrial Alliance analyst Al Nagaraj says Softchoice integrated the UNIS Lumin business faster than he expected, and he is doubly impressed that the company delivered in this quarter, which is typically its slowest. In a research update to clients yesterday, Nagaraj raised his 2012 earnings estimate to $1.39 from $1.31. The Industrial Alliance analyst maintained his BUY recommendation and increased his price target to $15.50 from his previous $14.50 target. His numbers are based on a 11.1x multiple of the $1.54 he expects Softchoice will earn in 2012.

Softchoice, which was founded in 1989, boasts more than 14,000 small and medium-sized business, enterprise and public sector customers across Canada and the United States. CEO MacDonald, who joined the company in 2001 after an eighteen year career at Xerox, helped transform the company from a software direct marketer to one of North America’s largest providers of technology solutions and services.

Nagaraj says expects the company’s cloud business will continue to demand high margins and new products such as Windows 8, Softchoice Cloud and services will drive growth over the next year.

At press time, shares of Softchoice were up 1% to $11.88.

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