A better than expected quarter has Cantor Fitzgerald Canada analyst Ralph Garcea feeling more bullish than ever about TIO Networks (TSXV:TNC).
Yesterday, TIO reported its Q1, 2016 results. The company earned $1.4-million on revenue of $15.3-million, a topline that was down 22 per cent over the same period last year.
“We are very pleased to deliver the best quarterly net profit, EBITDA and gross profit metrics in the company’s lifetime,” said CEO Hamed Shahbazi. “This quarter we continued to build on the successes of the prior fiscal year as Tio, and its subsidiaries all achieved improvements in growth and profitability. As we move into calendar 2016, we look forward to closing our acquisition of Softgate Systems which will enhance profitability and further establish Tio as one of the leading players in the U.S. consumer bill payment processing and receivables management marketplace.”
Garcea notes that the quarter bested his and the street’s expectations on both the top and bottom line. The analyst says he expects the “transformational” acquisition of Softgate, which he expects to close in January, will bring sustainbale EBITDA upside to TIO. He thinks the company can deliver organic revenue growth of between five and ten per cent and that the company’s EBITDA will approach 15 to 20 per cent, long term.
Garcea commented on the TIO’s share price, which he believes is still an attractive entry point for investors.
“Following a gap up on very strong volume, TNC is currently trading in a textbook uptrend, making higher highs and higher lows with both its 50-day and 200-day moving averages trending positively,” he said. We expect price action to continue in this range until a break occurs. The 50-day moving average and lower band of its channel should continue to act as support.”
In a research update to clients today, Garcea maintained his “Buy” rating but raised his one-year target price on TIO Networks from $2.75 to $3.00, implying a return of 54 per cent at the time of publication.
Disclosure: Cantech Letter Editor Nick Waddell is a shareholder of TIO Networks.