“Strong Buy” TECSYS gets price target raise from Industrial Alliance

Industrial Alliance analyst Steve Li says he doesn’t see many synergies in TECSYS’ (TSX:TCS) latest acquisition, but he does see “significant” cross selling opportunities.

On May 29th, TECSYS announced it had signed an agreement to buy all the shares of of Logi-D Holding, a provider of point-of-use technology for supply chain automation servicing hospitals and health care organizations. TECSYS paid $2.95-million in cash, plus $100,000 of its own shares of the Quebec-based company, which posted revenue of $5.57-million in its fiscal year ended June 30, 2013.

TECSYS CEO Peter Brereton explained the move.

“This acquisition will bring together two Quebec-based technology companies with complementary product lines and extend our leadership in health care supply chains, where more than 30 per cent of our business is currently coming from,” he said. “Logi-D’s technology reduces the time clinical staff spend managing their inventory, leading to proven reduction in costs, with improved patient care and outcomes. We remain the only supply chain solution built to address the specific needs of the health care industry and will continue to expand our offerings both organically and through acquisitions.”

Li says aside from a few marketing and admin staff, there is little synergy to be had from Logi-D’s 27 employees. But he says the acquisition is very worthwhile because of TECSYS’ large sales distribution channel and management’s hunch that Logi-D’s solution will improve its own overall sales cycle.

Following the announcement, Li has tweaked his fiscal 2015 estimates slightly upward. He now believes the company will post EBITDA of $5.9-million on revenue of $55.1-million. In a research update to clients yesterday, the Industrial Alliance analyst maintained his “Strong Buy” rating on TECSYS and raised his one-year target price to $8.00, up from his previous target of $7.50.

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