PI’s Sangha increases one year target on Solium Capital to $5.75

PI analyst Pardeep Sangha says Solium Capital (Solium Capital Stock Quote, Chart, News: TSX:SUM) is showing signs of success in integrating its recent acquisitions.

On Tuesday, before market, Solium reported its Q1, 2013 results. The company earned $2.67-million on revenue of $18.2-million, up 43% from the last year’s Q1.

Sangha says Solium’s Q1 beat his expectations for revenue and for adjusted EBITDA, which were $16.1-million $5.0-million, respectively. Solium’s adjusted EBITDA came in at $5.4-million, up from $4.1-million in Q1 2012.

The PI analyst says Solium’s success in integrating its recent acquisitions was buttressed by strong results from its U.K. operations. While he notes that expenses ramped up in Q1 because of the acquisitions and increases in product development expenses, he also points out that the company has a strong balance sheet to execute on its growth strategy, with $14.6-million in cash of March 31st. In a research update to clients Wednesday, Sangha maintained his BUY rating on Solium Capital, but raised his one year target price to $5.75, up from his previous target of $5.

Calgary-based 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. Until last year, the company concentrated largely on the Canadian market, but has recently scaled up to capitalize on opportunities in the U.S. and U.K.

Sangha says he is now forecasting 32% revenue growth for Solium Capital in fiscal 2013, increasing his topline expectations from $62.1-million to $66.3-million. He is leaving his expectations for EBITDA at $15.3-million because of higher operating expenses.

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