Mediagrif is headed in the right direction, says Echelon

E-commerce solutions company Mediagrif Interactive Technologies (Mediagrif Interactive Technologies Stock Quote, Chart, News TSX:MDF) has a new strategic plan and it’s getting the thumbs up from analyst Amr Ezzat of Echelon Wealth Partners, who says that the company’s focus on the higher-growth business-to-business segment is the right move.

Ezzat delivered a client update on MDF last Wednesday, which reaffirmed his “Buy” rating and $14.00 price target, representing a projected 12-month return of 148.2 per cent at the time of publication.

Longueuil, Quebec’s Mediagrif had its annual general meeting on September 11, at which the company announced the appointment of new President and CEO and tech industry veteran Luc Filiatreault. Filiatreault has founded and managed multiple companies including three publicly listed companies that were acquired by major players in the tech industry.

Most recently, he was CEO of Ayda Media Systems and Vice President, Ventures, at Open Text. In 2009 he was named IT Personality of the Year in 2009 by the Information Technology Association of Quebec.

Mediagrif management also put more colour on the company’s new action plan, first announced in June, which involves a refocusing on B2B. The company clarified that the first phase of the plan involved the already-accomplished divestment of LesPac, the company’s largest B2C asset, as well as an aim at seizing growth opportunities in North America in two sectors, namely, Strategic sourcing (which includes Mediagrif assets MERX and BidNet) and Unified Commerce (orckestra, InterTrade and Carrus).

“The forecast for Mediagrif's two priority B2B markets is very promising: market forecasts for both Unified Commerce and Strategic Sourcing predict multi-billion dollar spending and solid double digit growth from now to 2023. Additionally, the high percentage of recurring revenues generated by these sectors represent a strong foundation for sustained growth,” wrote Filiatreault in a press release last Wednesday.

Ezzat says the refocus of B2B can push MDF’s valuation higher.

“We believe MDF’s core B2B business is a gem (high visibility growth), concealed by noise from the much smaller (and highly cyclical) B2C segment. We believe the divestment of LesPAC (and the impending sale of the other B2C assets) improves the Company’s sustainability, shifting the focus away from a more competitive and less predictable segment,” Ezzat writes.

“The Company’s recent anemic top line growth is directly linked to the underperforming consumer platforms. We believe this has put considerable pressure on the stock price/valuation levels. As a result, the B2B platforms (which have high visibility and growing at healthy rates) are not fairly valued within the consolidated operations,” he said.

Ezzat thinks Mediagrif will generate fiscal 2019 revenue and EBITDA of $83.1 million and $20.7 million, respectively, and fiscal 2020 revenue and EBITDA of $76.5 million and $17.1 million, respectively.

“Our target price of $14.00/shr reflects our continued belief in the underlying value of the Company’s B2B “crown jewels” (namely, InterTrade and the e- procurement platforms).

We believe further capital allocation decisions refocusing the business on B2B (both acquisitions and divestments) can push valuation higher,” said Ezzat.

Mediagrit’s share price has been on a downward trend for a number of year but the stock had a nice bounce last week, climbing 35 per cent for the week. Year-to-date, MDF is down 26 per cent.