So far, supply chain management software company Kinaxis has had a superb run.. The Ottawa-based SaaS business has seen its share price climb 30 per cent since mid-2016 and over 500 per cent since its IPO in 2014, even as the company keeps picking up big name clients.
Kinaxis just announced that global biopharmaceutical company Ipsen has chosen the company to manage its supply chain, while a number of auto manufacturers have also been signed up, including Toyota, Nissan, Ford and Volvo.
Imhof says that Kinaxis is one of a small handful of excellent IPOs in Canada over the past five years.
“You can talk about Kinaxis, Shopify, Spinmaster, Canada Goose and Jamieson Vitamins — and most of the other ones haven’t done extremely well,” Imhof said to BNN Bloomberg. “It’s a very good story.”
Imhof spoke of last year’s breach of contract dispute with electronics giant Samsung, which caused a significant drop in KXS’s share price.
“It went up to $80 and then came down to about $70 after it lost Samsung,” he says. “There was a dispute there. To be quite honest, I think Samsung didn’t treat them well and was trying to cut down their margins quite a bit and Kinaxis said, ‘Well, if that’s the way you want to play, we’re going to exit this agreement.’ It scared a lot of people out of the stock.”
But Imhof claims that at 70x forward earnings (Kinaxis has a market capitalization of US$2.1 billion and a share price currently in the mid-$80 range), the stock is too expensive right now.
“It’s been a really good story and I really like the management team,” he says. “They have a lot of great reference customers, and I think that’s how they continue to grow. It’s just that the multiple for me to re-enter it right now is a little bit high.”
“In the US, the tech sector has done incredibly well, so that’s why these multiples are so high, even in Canada on SaaS names,” says Imhof.