Kinaxis partnership with Ernst & Young gets thumbs up at Laurentian Bank Securities

A new alliance with Ernst and Young is a positive for Kinaxis (Kinaxis Stock Quote, Chart TSX:KXS), says Laurentian Bank Securities analyst Nick Agostino.

This morning, Kinaxis announced it has signed a deal with Ernst & Young that will see the pair work together to improve the supply chain efficiences of their clients.

“The complexity and continuing evolution of supply chain planning require experienced change management, process re-engineering, data integration and implementation capabilities,” said Kinaxis chief revenue officer Paul Carreiro. “The integrated and collaborative EY approach to serving their clients aligns with our philosophy and our capabilities to help achieve a consolidated view of the entire supply chain so that clients can plan expected performance, monitor progress and respond to disconnects. Combined this creates a strong foundation for our alliance, and we look forward to working with EY as we help customers move through their digital supply chain journey.”

Agostino says this is a move that could drive business to Kinaxis.

“We view the addition of multinational professional services firm EY -one of the largest PS firms in the world with 260,000 employees and US$34.8B in annual revenues– along the same lines of Accenture and Deloitte (existing global KXS partners), capable of driving growth for KXS within existing and new verticals, including with global conglomerates,” the analyst says. “We note EY primarily focuses on automotive/transportation, healthcare, power/utilities, and government services, with an aim to deliver disruptive technologies to its client base. We believe the partnership is a good combination, particularly given the reported successes to date with SI comparables Deloitte, Accenture et al, who are driving the bulk of KXS’s new customer wins (of note, 65% of new subscription revenue growth stems from new customers), and should help accelerate growth (including sales and onboarding services) in key verticals such as technology, life sciences, and automotive.”

In a research “Flash” update to clients today, Agostino maintained his “Buy” rating and one-year price target of $100.00 on Kinaxis, implying a return of 51 per cent at the time of publication.