Kneatcom has a 186 per cent upside, Echelon Wealth says

In a Wednesday update to clients, Echelon Wealth Partners analyst Gianluca Tucci has reiterated his Top Pick status for life sciences software company Kneatcom (Kneatcom Stock Quote, Chart TSXV:KSI), saying that kneat’s recent financing should fuel revenue growth.

Kneat has closed on its $8.5 million financing, which includes a $6.3-million overnight marketed deal plus a $2.2-million insider private placement. As well, the company announced evidence of early-stage scaling at two of its existing customers, a leading laboratory services customer and a global healthcare customer.

Tucci says that of the seven customers KSI signed in 2018, three went live during the second half of 2018 with Kneat’s platform and have since initially scaled while the other four are in an initial deployment phase.

“We believe [the financing] will fuel its revenue ramp commencing in 2H19,” says Tucci.

“We continue to expect near-term qualitative wins/scaling news flow with 2H19 starting to show financial benefit and scalable operating leverage,” he says. “We forewarn that revenues are likely to be lumpy while SaaS revs build up to offset the lumpiness of on-premise revs – the focus is on SaaS. We further highlight that opex timing will vary with scaling momentum.”

Relating to Kneat’s Gx platform, which helps large and small life sciences companies digitize their processes, Tucci points out that KPMG estimates that 45 per cent of life sciences companies have implemented technologies to automatically generate and analyze production and distribution of data in order to increase internal efficiency, or plan to do so.

The analyst is estimating that KSI will generate a fiscal 2018 EBITDA loss of $4.08 million on revenue of $1.11 million and a 2019 EBITDA loss of $4.6 million on revenue of $2.00 million. He is maintaining his “Speculative Buy” rating and $3.00 target price, representing a projected return of 186 per cent at the time of publication.