Its stock has had a nice run, but Industrial Alliance Securities analyst Blair Abernethy thinks there is still upside in Vancouver-based consumer billing processor TIO Networks (TIO Networks Stock Quote, Chart, News: TSXV:TNC).
In a research report to clients Friday, Abernethy initiated coverage of TIO Networks with a “Buy” rating and a one-year price target of $2.75, implying a return of 28.5 per cent at the time of publication.
Abernethy believes TIO will continue to grow organically, while a more recent appetite for M&A can continue to expand the scope of its business.
“We believe that TIO Networks is well positioned to organically grow its transaction volumes and financial services revenues,” says the analyst. “The Company has 10K+ billers currently available on its payment network that reaches 65K+ retail locations and continues to build an online presence. We believe that TIO’s platform can retain and grow its share of bill payment transactions in a market of ~35M underbanked and unbanked US households.”
Abernethy says early returns suggest TIO seems to have the knack for making acquisitions that work.
“In recent years, TIO has been active on the M&A front, having completed three strategic transaction processing acquisitions,” he explains. “These additions have expanded the Company’s reach and product offering in the bill payment market. We expect TIO to remain disciplined capital allocators and to continue to grow margins as the business scales up.”
Abernethy believes TIO will generate EBITDA of $10.2-million on revenue of $76.1-million in fiscal 2016, numbers he expects will climb to EBITDA of $15.2-million on a topline of $106.6-million in fiscal 2017.
Disclosure: Cantech Letter editor Nick Waddell owns shares of TIO Networks.