Kinaxis is the thought leader in supply chain management, says PI

After attending the company’s annual customer conference in Orlando, Florida, PI Financial analyst Gus Papageorgiou is staying bullish on Kinaxis (Kinaxis Stock Quote, Chart, News TSX:KXS).

The analyst issued a corporate update to clients on Wednesday, reiterating his “Buy” rating and $92.00 target price, which represents a projected return of 7.7 per cent at the time of publication.

It’s been a good year so far for Kinaxis shareholders, with the stock up over 28 per cent year-to-date. Trading at C$84.86 as of late-day Wednesday, KXS is still well off its high of C$100.68 hit in August of last year.

SaaS-model supply chain management company Kinaxis unveiled new and enhanced capabilities to its RapidResponse platform at its Kinexions ’19 user conference on Tuesday, saying that the platform is being opened up to third-party developers in aid of increasing its viability.

“Today, we are thrilled to announce that our platform will be open to third parties for the development of new applications and extensions. This will provide the market with ultimate control and the potential to embed unique differentiation without suffering challenging upgrades over time. It also represents an exciting opportunity for Kinaxis to advance our own path into new markets and adjacent applications,” said CEO John Sicard in a press release.

Papageorgiou says attendance at Kinexions ’19 was the largest yet, which highlights the company’s growing presence outside of its main verticals in tech and life sciences. He noted that the enhancements added to RapidResponse include a scheduling feature, one of the top criticisms of the platform up until now and an addition which could lead to increased pricing.

The analyst is taking the customer conference as a positive for the company and stock.

Kinaxis has almost “cult-like” support, PI says

“Through our discussions with channel partners, employees and customers we again come to the conclusion that RapidResponse is a market leading solution that enjoys almost cult-like support from its customer base,” writes Papageorgiou.

“Competing solutions, such as those from SAP, are gaining to a degree and the movement to in-memory databases should close the gap further. However, today we believe Kinaxis further distinguished its solution. By allowing external data sources to integrate into supply chain planning the Company has recognized that this process is not subject simply to the internal variables a company can somewhat control. It also depends on many external factors<‘ he writes.

“Incorporating those factors into the supply chain solution is a step that, we believe, the competitors are missing. Time will tell how relevant this is to KXS’ customers and if it can be copied, but we believe there is little doubt Kinaxis maintains its position as the thought leader in supply chain management. We would advise investors to develop or maintain an overweight position in the name,” Papageorgiou says.

The analyst estimates that KXS is trading at 7.3x forward 12 month EV/Sales, which is a hair above its peer group average multiple of 7.2x. Papageorgiou says, “We note that although KXS may have slightly lower growth than some SaaS names its profitability and cash flow are substantially higher.”

Papageorgiou thinks KXS will generate fiscal 2019 revenue and EBITDA of $185.4 million and $50.9 million, respectively, and fiscal 2020 revenue and EBITDA of $209.0 million and $58.0 million, respectively. (All figures in US dollars unless where noted otherwise.)