Vancouver-based TIO Networks (TSXV:TNC) has enjoyed an extended run of late, but Paradigm Capital analyst Kevin Krishnaratne thinks the stock still has upside.
In a research report to clients today, Krishnaratne initiated coverage of TIO with a “Buy” rating and one-year target price of $2.25, implying a return of 26 per cent at the time of publication.
In July, TIO announced it would acquire consumer retail bill payment solutions Softgate Systems for approximately (U.S.) $31-million. The company said the deal would position it as the largest North American provider of walk-in bill payment services and increase its revenue number to over (C) $100-million.
Krishnaratne estimates that the Softgate deal, which he expects to close in the coming months, is worth more than $0.80 a share to TIO. The analyst says M&A is a key driver for TIO and expects that another deal will surface by the middle of next year. But to those who might be led to believe the company’s growth is all about M&A, Krishnaratne points out that the more than 65 per cent gain in EBITDA forecast for fiscal 2016 is all organic, something the analyst says reflects the scalability of the company’s platform.
“TIO is a uniquely positioned FinTech company with a deep understanding of the financially underserved market, which is large, growing and ripe for consolidation,” says Krishnaratne. “Management has done a superb job over the past two years scaling the company through accretive M&A and driving cost efficiencies to create a leader in the U.S. walk-up bill payments space. We believe that TIO is on the path to continued growth, not only by expanding its payment processing business, but also through the addition of new services for the underbanked, unbanked and unhappily banked consumer, both in North America and internationally.”
Disclosure: Cantech Letter Editor Nick Waddell owns shares of TIO Networks.