It’s been one of the best performing stocks on the TSX this year, but Mackie Research Capital analyst Nikhil Thadani thinks there is still room to make money on Mogo (TSX:MOGO).
Yesterday, Mogo announced that it had closed its previously announced debenture offering that raised it a total of $15-million.
Thadani says this financing will supports Mogo’s ability to grow its gross loan book to more than $125-130-million through 2018 vs.
its current level of approximately $70-million. The analyst says Mogo still looks cheap compared to its peers.
“We believe improving valuation driven by H2/17 revenue growth could drive additional gains,” he says. “On a 2018 basis, Mogo trades at ~2.1x net sales vs. FinTech names at an average ~3.9x. High growth Canadian tech names trade at higher revenue multiples. We exclude funding debt (i.e. credit facilities to fund loan book including yesterday’s $15 mln debt raise) from net debt and account for loan book interest revenue net of funding interest expenses. Our $6/sh target implies ~2.7x 2018 net sales – with bias to the upside on revenue growth execution.”
In a research update to clients today, Thadani resumed coverage of Mogo with a “Speculative Buy” rating and one-year price target of $6.00, implying a return of 39 per cent at the time of publication.
Thadani thinks Mogo will post EBITDA of $600,000 on revenue of $47.6-million in fiscal 2017. He expects those numbers will improve to EBITDA of $8.3-million on a topline of $69.6-million the following year.
Disclosure: Mogo is an annual sponsor of Cantech Letter and editor Nick Waddell owns shares of the company.