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Kneat.com has a 138 per cent upside, Mackie Research says


Life sciences software company Kneat.com Inc (Kneat Stock Quote Chart TSXV:KSI) is laying a strong foundation for a positive revenue inflection in 2019, says Nikhil Thadani of Mackie Research Capital Corporation who on Thursday initiated coverage with a “Buy” rating and $2.50 target price, representing a projected 12-month return of 138 per cent at the time of publication.

Aimed at Tier 1 global pharma, biotech and medical device companies, Kneat’s platform enables electronic generation, execution and approval of documents, real-time validation metrics and searching capabilities. The company is based in Limerick, Ireland, and was listed on the TSXV in July 2016.

Thadani says that the company is expanding its target roster of customers within the life sciences value chain, which includes the top 100-150 global pharma and medical device companies.

“We expect 2018 contract signings to meaningfully scale revenue from H2/19 onwards,” says Thadani. “Existing and new contract deployments should contribute to meaningful revenue growth, leading to total 2020 revenue of >$9 million and recurring revenue of ~$5 million. We expect Kneat to end 2020 with total signed SaaS contracts at ~500 plants, i.e., 300 more plants added through 2020, which could be conservative given Kneat’s 2018 traction (200 plants).”

Thadani notes that management has a collective 60 years of relevant experience in the sector and that the 40 per cent inside ownership of shares bodes well for shareholder interests, saying that board chair Ian Ainsworth is “very well respected and regarded by investors, adding more governance credibility.”

“On a 2020 basis, Kneat trades at six times sales versus US software and SaaS companies at seven times 2020 sales and Canadian companies at six times, with 2020 year-over-year revenue growth at 20 per cent and 15 per cent respectively,” the analyst says.

“That said, we believe KSI’s valuation and upside will become increasingly compelling as the company demonstrates a revenue inflection towards the $20-million of average recurring revenue from contracts already signed (total revenue will naturally attain that level sooner, we expect in 2022).”

Thadani expects Kneat to produce an EBITDA loss of $3.2 million in 2019 on revenue of $3.0 million and positive EBITDA of $1.9 million in 2020 on a top line of $9.2 million.

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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