Solium Capital’s latest acquisition gets thumbs up at Canaccord Genuity

Solium Capital Inc. (TSX:SUM) has acquired San Francisco-based Advanced-HR, a cloud-based service provider of private company compensation data and planning. The second smaller company pickup in recent months, the Advanced-HR tuck-in will help with Solium’s penetration as SaaS provider of global equity administration and financial reporting software, says analyst Robert Young of Canaccord Genuity, who on Wednesday reiterated his “Buy” rating and target price of $12.50 on the stock.

The last few months have been busy for Calgary-based Solium, with the October acquisition of cap table management and electronic share tracking service provider, Capshare, along with the closing of a $46-million financing round in November. On Wednesday, Solium announced their newest purchase, Advanced-HR, with Solium CEO Marcos Lopez saying that the pickup adds a new facet to the Solium toolkit.

“Not only is Advanced-HR the de facto leader in compensation data, they show companies and their VC partners how to put the data to work to make informed decisions in building their teams,” said Lopez, in a press release. “With this acquisition, our private market clients will now be able to use Advanced-HR’s equity data and benchmarks to guide them in compensating their employees.”

Although the terms of the deal have yet to be disclosed, Young estimates a $3-8 million price, with the expectation that it will be paid in cash and have no material effect on Solium’s net cash position.

“Solium is leveraging its well-capitalized balance sheet to execute on its M&A strategy,” says the analyst in a note to clients on Thursday.

“In combination with the current Shareworks platform and Capshare’s independent solution, the tuck-in of Advanced-HR should further enhance Solium’s penetration across the broader private market,” says the analyst.

“Solium currently trades at 3.3x C2018E EV/Sales, a discount to small- and mid-cap SaaS peers at 5.1x and a more targeted group of higher-growth HRIS and financial SaaS, which trade at 7.8x,” says the analyst. “Using regression analysis of revenue growth + FCF margin, we base our valuation on 4x EV/2018E Sales.”

Young rates Solium as a “Buy” with a one-year target price of $12.50, representing an 18.4 per cent return on investment as of February 21, 2017.