Paradigm Capital launches coverage of Martello Technologies with a “Buy”

So says Paradigm Capital analyst Kevin Krishnaratne, who today initiated coverage of Martello with a “Buy” rating and a one-year price target of $0.70, implying a return of 125.8 per cent at the time of publication.

“Martello Technologies Group (MTLO) is a leading technology company that helps businesses achieve greater clarity and control of their corporate networks that are increasingly being deployed across complex hybrid cloud environments,” the analyst said in the new report. “We think Martello is well aligned with voice & data trends in the modern enterprise, with its focus on Unified Communications, SDWAN & IT Operations Analytics, and vision of disrupting the Digital Experience Monitoring market, which Gartner pegs at ~US$650–US$850 million. Martello’s 10-year history as the provider of analytics software for Mitel’s phone systems and its differentiated tech stack, coupled with management’s deep network experience provide a strong competitive edge, while we see strategic partnerships and M&A providing multiple paths for revenue upside over our forecast.”

Krishnaratne thinks Martello will post Adjusted EBITDA of negative $3.2-million on revenue of $13.2-million in fiscal 2020. He expects those number will improve to EBITDA of negative $2.4-million on a topline of $15.7-million the following year.

The analyst notes that Martello has strong management and a board that brings a wealth of telecom experience to the table.

“Martello is led by a strong team with a depth of experience in the telecom and networks industry,” he said. “Sir Terry Matthews, who co-founded Mitel, currently serves as coChairman alongside Bruce Linton who had been Martello’s CEO until December 2017 when he left owing to commitments required in his additional role as CEO of Canopy Growth Corporation . Both bring a strong track record of M&A and telecom experience. Martello is currently led by John Proctor, another technology veteran who brings a wealth of experience including the role of Vice President, Global Cyber Security at CGI where he was responsible for defining the strategic vision for the company’s cybersecurity policies.”

“We are initiating coverage of MTLO with a Buy rating and $0.70 target (7.5x FY22e EV/Sales), with the stock trading at 3.6x CY21e versus the North American SaaS group at ~8.5x,” the analyst concluded. “We view MTLO as an attractive way for investors to gain exposure to the highgrowth Unified Communications & SDWAN markets, with further optionality for M&A into adjacent areas including AIOps and ITSecurity.”