KuuHub is undervalued, Echelon Wealth says

Echelon Wealth Partners analyst Ralph Garcea thinks there is big upside in Finnish mobile game developer KuuHub (KuuHub Stock Quote, Chart, News: TSXV:KUU).

In a research report to clients today, Garcea initiated coverage of KuuHub with a “Buy” rating and one-year price target of $4.00, implying a return of 120 per cent at the time of publication.

The analyst says KuuHub’s growth will be defined by strategic acquisitions similar in scope to the one it just completed. The analyst listed five reasons why investors should be looking at the stock now.

As a result of the Sumoing Oy acquisition, KuuHubb acquired one of the top online colouring apps (Recolor), retaining key personnel that were instrumental in its development, and re-focusing on the Lifestyle and Entertainment segments,” the analyst says. “(2) With experienced management and development teams, KuuHubb has the ability to create new online apps and content with competitive cost structures, quality, and development times. (3) KuuHubb’s co-founder and CEO, Jouni Keränen, has over 18 years of international business and management experience, with an in-depth knowledge of the online games industry and market in China and elsewhere in Asia, which are a strategic focus for KuuHubb. (4) KuuHubb’s management team has extensive connections in the global gaming community in both Asian and Western markets, which KuuHubb believes can be used to its advantage in multiple ways. (5) Shareholder value is created through acquisitions of proven, underappreciated assets with vast long-term global potential.”

Garcea thinks KuHubb will generate Adjusted EBITDA of $900,000 on revenue of $26.2-million in fiscal 2018. He expects those numbers will improve to EBITDA of $4.6-million on a topline of $46.3-million the following year.