M Partners analyst Ron Shuttleworth is keeping an eye on Solium Capital’s (TSX:SUM) bottom line.
Management of the Calgary-based software company spent part of last week marketing to institutional investors in Toronto, and said it expects it expects organic revenue growth to range between 10% and 15% annually. This is in line with Shuttleworth’s forecast of 10.6% growth for fiscal 2013, but the M Partners analyst says he is watching EBITDA margins, which he says could be impacted by the integration of acquisitions the company completed during fiscal 2012.
Shuttleworth says Solium management expects that EBITDA margins will range between 20% and 25% for the foreseeable future. His forecast is for margins of 24.1% for fiscal 2013. But he says some catalysts could impact his forecasts to the upside.
The award of trust and banking licenses, such as the one the company signed in Alberta, could be a precursor to more regional licenses granted, which Shuttleworth says would help increase transactional revenue.
Solium, says Shuttleworth, has been actively bidding for “books of business” from regional equity compensation providers that could benefit from administrative automation. If it starts to win this type of business, he says, both revenue and EBITDA margins will improve.
And as Solium expands into the United States, Shuttleworth says keep an eye out for the signing of major wealth managers and Fortune 500 corporations as meaningful catalysts.
Shuttleworth today maintained his BUY recommendation and 12-month share price target of $4.75.
Solium Capital helps companies sort through the regulatory tangle that is equity-based compensation. This type of remuneration, which 97% of companies offer their employees, is extremely complex because of changing regulatory environments, employee churn and localized rules. Solium Capital, which has largely concentrated its effort in the Canadian market, boasts 75% of the top 100 companies listed on the TSX among its clients.
Shares of Solium Capital closed today up 1% to $4.10.