Syncordia Technologies’s Billing Solutions deal a good one, says Mackie Research

A surprise acquisition by Syncordia Technologies (Syncordia Technologies Stock Quote, Chart, News: TSX:SYN) gets the nod from Mackie Research Capital analyst Nikhil Thadani.

This morning, Syncordia announced it had entered into a definitive agreement with Healthcare Solutions Corp. to acquire 80 per cent of the issued and outstanding membership interests in Billing Solutions LLC for (U.S.) $8-million.

“This acquisition represents another key milestone in our strategy to aggregate high-quality, privately owned health care companies in the revenue cycle, where Syncordia’s proprietary technology can be used as an accelerator,” said Syncordia CEO Michael Franks. “Jimmy (Rizzo) has built a great company, and we look forward to working with him to implement the Syncordia Cloud solutions and drive additional growth and profitability in the business.”

Thadani says he likes the move by Syncordia, but he stresses that he believes the company’s success will still come down to blocking and tackling.

“Today’s surprise acquisition adds to SYN’s EBITDA generation capability, which in the long run should help the stock garner a higher valuation,” says Thadani. “That said, we continue to believe contract pipeline conversion remains the single most important potential positive catalyst for the stock. SYN trades at ~0.8x EV/Sales and ~4.2x EV/EBITDA on a pro forma C2017 basis vs. larger US names at ~3.2x and ~12.7x respectively. We expect SYN to convert the company’s ~$3-3.5 mln/yr annual revenue pipeline into signed contracts through C2016.”

In a research update to clients today, Thadani maintained his “Speculative Buy” rating and one-year target price of $2.00 on Syncordia, implying a return of 556 per cent at the time of publication.