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TECSYS is still undervalued, Echelon Wealth says

Tecsys
Tecsys CEO Peter Brereton.

A new acquisition for TECSYS (TECSYS Stock Quote, Chart: TSX:TCS) has Echelon Wealth Partners analyst Amr Ezzat maintaining his bullish stance on the stock.

This morning, TCS announced it would acquire Ontario-based distributed order management software OrderDynamics Corp. for $13.37-million.

“We’re excited to welcome OrderDynamics to the TECSYS family,” TECYSYS CEO Peter Brereton said. “They will be a highly valued part of our team with their depth of expertise in the B2C retail domain. The powerful combination of our two companies will extend our reach into this fast-moving space and capitalize on our existing footprint in the key markets of North America, Europe, and Australia.”

Ezzat says this is a solid pickup for TECSYS.

“OrderDynamics is expected to deliver $7M in revenues (30% y/y growth) and -$2M in EBITDA for its fiscal year ending March 31, 2019,” the analyst notes. “Beyond the financials and the standalone high growth of the platform, we think the acquisition is a sound strategic move in that it also adds a critical piece to TECSYS’ solutions suite and ultimately will help the Company enhance the growth profile of its core complex distribution vertical (56% of total revenues and 50% of new account bookings). Namely, potential clients are increasingly requesting a distributed order management (DOM) system and dynamic e-fulfillment capabilities, something TECSYS didn’t have in its Supply Chain Management suite.”

In a research update to clients today, Ezzat maintained his “Buy” rating and one-year price target of $19.00 on TECSYSY, implying a return of 34.3 per cent at the time of publication.

The analyst thinks TCS will generate EBITDA of $9.7-million on revenue of $77.9-million in fiscal 2019. He expects those numbers will improve to EBITDA of $13.9-million on a topline of $87.7-million the following year.

“We remain fans of the secular growth trends TECSYS is exposed to and do not view recent top line slowdown as a knock on our investment thesis,” Ezzat adds. “The balance sheet remains very healthy post the acquisition ($24.4M in cash as at last quarter), providing the Company with ample room for more acquisitions to supplement its growth.”

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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