Quorum Information Technologies has a 95 per cent upside, Beacon Securities says

Quorum Information Technologies (TSXV:QIS) has made a pair of recent announcements that analyst Gabriel Leung of Beacon Securities is taking as positives for the company, stating in a corporate update on January 25 that he’s reaffirming his “Buy” rating and $1.25 target price.

Last week, Calgary-based Quorum, which develops enterprise management software for automotive dealerships, said that it has now completed all certification requirements for manufacturer integration with Volkswagen group of America, making its Xsellerator DMS platform available to dealerships for Volkswagen and affiliated franchises.

“With this new certification, we now support 19 different vehicle franchise brands, and have others in the works,” says Dan Ichelson, Vice President of Product and Operations, in a press release . “This is an important part of Quorum’s growth strategy for XSELLERATOR, and we’ve found that more and more dealership groups are now looking to us to support their entire organization.” 

Quorum also announced last week that it has entered into a strategic partnership with AutoCanada, whereby QIS will offer a tailored software solution leveraging DealerMine’s CRM platform to drive more service department traffic to AutoCanada’s Canadian dealerships.

Leung calls the Volkswagen announcement “an important milestone” for Quorum as it gives the company a license to hunt for US-based VW and Audi dealerships, expanding its addressable market opportunity. On the AutoCanada deal, Leung says the contract could be worth about $3 million a year for QIS.

“We view the AutoCanada partnership as a strong validation point for DealerMine’s CRM platform,” says Leung. “Over time, we believe there could also be additional benefits including potential deployment of QIS’ Xsellerator DMS platform within AutoCanada dealerships (we understand they are currently using CDK). Furthermore, we believe AutoCanada could act as a champion for QIS in terms of accelerating certification/integration with OEMs who are not currently working with QIS (i.e. such as Mazda, Honda and Volkswagen in Canada).”

Leung is estimating 2019 EBITDA of $3.2 million on revenue of $26.3 million and 2020 EBITDA of $5.4 million on a top line of $28.6 million. His target price represented a projected return of 95 per cent at the time of publication.