Kneat keeps “Top Pick” status for 2019 at Echelon Wealth Partners

The addition of another global biotech customer has Echelon Wealth Partners analyst Gianluca Tucci maintaining his bullish stance on Kneat (Kneat Stock Quote, Chart: TSXV:KSI).

This morning, Kneat announced that an unnamed “international leader” in the biotech space with more than 20,000 employees had chosen its software platform.

“We look forward to working closely with this customer to convert their current paper C&Q process to an end-to-end digital process,” said Eddie Ryan, chief executive officer of Kneat. “C&Q is one of many processes that can be fully digitized on the Kneat platform, allowing our customers to experience meaningful productivity gains and cost savings while maintaining their high compliance standards.”

Tucci today explained this development and its ramifications.

“Kneat has announced it signed an international leader in biotechnology to facilitate its transition to paperless validation processes; this is an on-premise customer,” he said. “Kneat will be initially helping this customer for facilities, utilities and equipment C&Q (Commissioning & Qualification) at a manufacturing plant in the US and has manufacturing facilities in four continents and over 20K employees globally. We note this win took around five months to secure and was a competitive process; we expect the go-live event to occur in Q3/Q419. Also of note, Kneat pushed a major upgrade of its Kneat Gx software last week, version 8. Version 8 encompasses a much more enhanced CSV offering which enriches professional services productivity, market reach and scale potential. We continue to expect near-term qualitative wins/scaling news flow with 2H19 starting to show financial benefit and scalable operating leverage. 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.”

In a research update to clients today, Tucci maintained his “Speculative Buy” rating and one-year price target of $3.00 on Kneat, implying a return of 168 per cent at the time of publication. The analyst rates the stock as a “Top Pick”.

Tucci thinks Kneat will post EBITDA of negative $4.6-million on revenue of $2.0-million in fiscal 2019.