Quorum Information Technologies is a buy, says Beacon Securities

Auto dealership software company Quorum Information Technologies (Quorum Information Technologies Stock Quote, Chart TSXV:QIS) gets a target bump from Gabriel Leung of Beacon Securities, who in an update to clients on Tuesday maintained his “Buy” rating with the new target price of $1.50 (previously $1.25).

On Monday, Calgary-based Quorum reported its Q4 and 2018 fiscal year end results, with management saying the quarter was a game-changer for the company, specifically due to the acquisition of DealerMine, completed on October 31, for approximately $9.6 million in cash and $4.4 million in Quorum shares.

“Overall 2018 was a transformative year for Quorum,” CEO Maury Marks said in a press release. “Not only did we further our vision to build a single, integrated, end-to-end business process solution through a build, resell and acquire strategy but we also significantly increased our automotive dealership customer base.”

For the quarter, Quorum reported revenue and EBITDA of $5.9 million and $778,000, respectively, while Leung had forecasted $5.4 million and $458,000, respectively. The analyst noted that recurring SaaS/support revenues were $4.3 million, which was up 58 per cent year-over-year, while the company also generated approximately $874,000 from DealerMine BCE (business development centre), which is also recurring in nature.

Leung says he expects QIS’s top line to increase quarter-over-quarter for Q1, while also noting that the company ended 2018 with $1.7 million in cash against debt of $8.4 million.

“Overall, we believe this was a very promising start to the DealerMine integration with the Oasis acquisition and AutoCanada contract expected to further accelerate growth in 2019,” says Leung.

“We believe this an exciting time for Quorum as it pushes forward with its plan to accelerate market share gains in the North American auto dealership industry based its larger scale and product portfolio. We view the stock as representing a compelling buying opportunity given its large recurring revenue base, growing and profitable operations, and valuation of only 2x recurring SaaS/support revenues,” he says.

The analyst is calling for fiscal 2019 revenue and EBITDA of $27.6 million and $3.5 million, respectively, and fiscal 2020 revenue and EBITDA of $31.7 million and $5.6 million, respectively. His $1.50 target represented a return of 121 per cent at the time of publication.