VersaPay is undervalued, says Cantor Fitzgerald Canada

VersaPay CEO Craig O’Neill in Vancouver, April 2nd, 2014. Ahead of its second quarter numbers, Cantor Fitzgerald Canada analyst Justin Kew says he remains enthusiastic about Versapay’s (TSXV:VPY) prospects.

On Friday, Versapay will report its Q2, 2014 results. The company is following on a Q1 in which it lost $824,050 on revenue of $4.3-million, up 5% from the $4.1-million topline the company posted in the first quarter of 2013.

Kew says his investment thesis has not changed since he launched coverage of VersaPay in late June. He believes there is little competition for the company’s cloud-based account receivable automation solution and that its addressable market is “massive”. The analyst notes that there are about 400,000 U.S businesses with revenue of more than $5-million that are strong candidates for the company’s services and solutions. He points to a recent study from the Federal Reserve Banks of Minneapolis and Chicago that found just 12% of respondents used an electronic bill presentment and payment system to support the payment and remittance process.

In a research update to clients this morning, Kew maintained his “Speculative Buy” recommendation and a one-year price target of $1.70 per share on VersaPay. He target, he says, is based on 1.5x his expectation for the company’s fiscal 2015 revenue, which he thinks will come in at $21.9-million.

Founded in 2006, Toronto-based VersaPay is a company focused on the presentment and payment of electronic invoices. The company went public in 2010, and in September of last year, industry veteran Craig O’Neill replaced Bill McGill as CEO.

Kew says he likes VersaPay’s “proven” management team and a board he says has “deep software and payment processing expertise”. He gives thumbs-up to the recent appointment of former Descartes Systems Group CEO Art Mesher as Chairman.