Paradigm launches coverage of Tecsys with a Buy rating, $10.00 target

Public Law 113-54, which was signed into law by President Obama last November, establishes a national track and trace system for prescription medication that could accelerate an upgrade cycle of technology throughout the healthcare supply chain, says Paradigm Capital analyst Gabriel Leung.
There is a multi-billion dollar market opportunity in automating the healthcare supply chain and Tecsys (TSX:TCS) is positioned to grab a share of it, says Paradigm Capital analyst Gabriel Leung.

In a research report to clients this morning, Leung initiated coverage of Tecsys with a “Buy” rating and a one-year target of $10.00, implying a return of 55% at the time of publication.

Leung says that while the supply chain management space is a crowded one, Tecsys has focused on winning market share in several verticals. The company, he notes, has established domain expertise in the healthcare space. The Paradigm analyst estimates the company has a $5.5-billion addressable market in this vertical, partly owing to the fact that the supply chain has become a primary target for cost savings, as it represents more than 55% of a hospital’s operating expenses.

While Tecsys is faced with much larger competitors in supply chain management, such as SAP, Oracle and Manhattan Associates, he notes that the company’s vertical focus has already been paying off. The company is enviably positioned in the “Visionary” corner of Gartner’s Magic Quadrant for Warehouse Management Systems report, released in May of 2013.

Leung says in addition to its organic business opportunity, there are regulatory catalysts that could hasten the growth of Tecsys. He notes that the FDA recently released a final ruling that will see it establish a system to include unique identifiers on medical devices. He thinks this may play into the company’s wheelhouse, as its recent acquisition, Logi-D, has products that capture UDI information. Leung also says Public Law 113-54, which was signed into law by President Obama last November, establishes a national track and trace system for prescription medication that could accelerate an upgrade cycle of technology throughout the healthcare supply chain.

Shares of Tecsys closed today up 3.7% to $6.70.