Quorum Information Technologies has a 69 per cent upside, PI Financial says

On Monday, Quorum, which develops information technology for the automotive retail sector, announced that it has closed on a $15-million debt financing facility with BDC Capital which will go towards repaying its $7.5-million bridge loan from Covington Capital, related to the Quorum’s DealerMine acquisition, as well as cover the cost of its Oasis acquisition.

Quorum president and CEO Maury Marks said the debt facility will give QIS the financial flexibility it needs to fund future acquisitions.

“Growth through acquisitions continues to be on our radar as we look to enhance shareholder value and returns. As always, we will continue to closely evaluate our balance sheet, and the funding requirements of any potential acquisition to prudently determine the correct mix of debt and equity required,” Marks said in a press release.

Kwan rates the event as having a positive impact for QIS, with the fixed interest rate of 7.7 per cent being materially below the 12 per cent Quorum was paying Covington for the bridge loan.

Kwan says that on a valuation basis, QIS is a bargain compared to its peers.

“At just 1.7x EV/TTM revenue (pro-forma) and 2.4x EV/TTM support revenue (pro- forma), the stock is cheap on both an absolute and relative basis (the peer group is trading at ~6x and its closest peer CDK Global is trading at 4.2x on an EV/CY19e Sales basis).,” writes Kwan.

The analyst’s estimates remain unchanged, calling for revenue and Adjusted EBITDA in fiscal 2019 of $29.4 million and $4.2 million, respectively, and revenue and Adjusted EBITDA in fiscal 2020 of $31.5 million and $5.8 million, respectively.

Kwan’s $1.10 target represents a projected 12-month return of 69.2 per cent at the time of publication