Real Matters has a 49 per cent upside, National Bank says

Quarterly results from Real Matters (Real Matters Stock Quote, Chart TSX:REAL) were mixed as a result of continued softness in the market, according to analyst Richard Tse of National Bank of Canada, who on Thursday reiterated his “Sector Perform” rating and C$6.00 target price.

Shares of Real Matters, a network management services platform for the mortgage lending and insurance industries, were up almost nine per cent as of late-day trading on Friday, as investors reacted to the company’s first quarter 2019 financials delivered on Thursday. The quarter featured net revenue of $18.8 million, slightly off Tse’s $19.3 million estimate, and Adjusted EBITDA of $1.7 million, beating Tse’s $1.0 million estimate. (All figures in US dollars unless noted otherwise.)

REAL’s share price dropped 67 over 2018, a dramatic pullback, but there are no signs yet of a turn in the macro environment, says Tse, who says that the stock’s recent uptick (REAL rose 22 per cent over January) captures the outlook for the next 12 months.

“Nothing we saw or heard during today’s results and conference call changes our view that 2019 will remain a challenging year for REAL despite what the recent price appreciation would seem to signal,” says Tse. “Given the continued headwind in the originations market, particularly for refinance activity, we believe the risk-to-reward profile looks balanced.”

Tse expects Real Matters to generate EBITDA of $7.5 million in 2019 on gross revenue of $267.9 million and EBITDA of $16.0 million in 2020 on gross revenue of $309.2 million. His C$6.00 target represented a projected 12-month return of 49 per cent at the time of publication.