Eight Capital analyst Christian Sgro sees good times ahead for Quisitive Technology Solutions Inc. (Quisitive Technology Solutions Stock Quote, Chart, News, Analysts, Financials TSXV:QUIS) and its payments platform, LedgerPay which the analyst said has disruptive potential. In an update to clients on September 27, Sgro maintained his “Buy” rating and target price of C$2.75/share on QUIS for a projected one-year return of 96 per cent.
Founded in 2016 and headquartered in Toronto, Quisitive Technology Solutions is an IT consulting provider of Microsoft cloud services to a range of mid-market and Enterprise clients. The company is currently commercializing LedgerPay, its next-gen, cloud-based payments processing and payments intelligence solution.
Sgro’s latest analysis comes after Eight Capital hosted a day of virtual marketing with Mike Reinhart, CEO of Quisitive.
“Most conversations were centered around the payments landscape, and LedgerPay’s disruptive potential in the space,” Sgro said. “We believe the current share price offers attractive risk/reward with limited downside as the payments opportunity comes more clearly into view.”
Sgro notes that the company is in discussions with payment network providers like Visa and MasterCard to configure a private connection and have hardware installed locally in order to achieve full endpoint certification, with Sgro expecting its completion in the next few weeks as soon as one provider goes live.
The company has had a notable year from many different vantage points. In terms of acquisitions, the company made waves by completing the acquisition of BankCard USA, an established all-in-one merchant payment services provider, in May, which followed the closing of acquisition of Mazik Global, an independent software vendor that helps companies deploy Microsoft Dynamics CRM, Cloud and ERP solutions to the healthcare, public sector, education, and manufacturing industries.
Bringing Mazik Global into the fold, in particular, has paid immediate dividends, as Quisitive was named the 2021 Microsoft Healthcare Partner of the Year Award as a result of the MazikCare healthcare solutions’ considerable impact on and value in the healthcare industry, with a particular emphasis on Vaccine Flow, facilitated the delivery of over two million COVID-19 vaccine doses in the last 18 months.
“We are honored and proud to receive the Microsoft Healthcare Partner of the Year Award in recognition of the outstanding achievements of our MazikCare product,” Reinhart said in the company’s July 8 press release. “This award is further validation of the synergies and value gained in our recent acquisition of Mazik Global which brought outstanding IP, expertise in Microsoft Dynamics, and experience in healthcare to the Quisitive portfolio. We remain excited about the momentum that MazikCare and this award recognition brings to Quisitive and our continued focus on serving the healthcare industry.”
In addition, the company has strengthened its relationship with Microsoft throughout 2021 by receiving the company’s Adoption and Change Management Advanced Specialization, achieving membership in the Microsoft Business Applications 2021/2022 Inner Circle award based on sales, as well as achieving Co-sell Ready status for LedgerPay.
“With the support of the Microsoft channel, we expect that Quisitive aims to sign large US retailers as the company commercializes the product,” Sgro said. “We believe these contracts can be material revenue contributions at scale, and that these announcements will act as positive catalysts for the stock post commercialization.”
Sgro forecasts solid growth rates for the company in his financial projections, putting a projection of $93.7 million (all report figures in US dollars except where noted otherwise) on Quisitive’s 2021 revenue for a potential year-over-year increase of 88 per cent, followed by a potential 38 per cent year-over-year increase for 2022, with a projected figure of $129.2 million.
Meanwhile, Sgro forecasts similar growth from an EBITDA perspective; while the projected $15.1 million in EBITDA would represent a 79.8 per cent year-over-year increase, the EBITDA margin would drop to 16 per cent from the 17 per cent reported in 2020. However, Sgro projects another EBITDA spike to $26.3 million for 2022, which would indicate a 20 per cent margin.
Sgro’s valuation data also paints a positive picture for the company, as he projects the company’s EV/Revenue to drop from the reported 8.2x in 2020 to a projected 4.4x in 2021, then to a projected 3.2x in 2022. Meanwhile, Sgro’s EV/adjusted EBITDA multiples begin reporting in 2021 at a projected 27x, then dropping to a projected 15.5x in 2022.
With valuation targets set based on 6x the 2022 EV/Revenue multiple and a projected US$65 million in cash available for future acquisitions, Sgro believes the company is a good buy at its current levels.
“We believe the current price offers an attractive entry point as Quisitive’s revenue mix shifts further to payments and as the company executes on its strategic M&A mandate,” Sgro said. “Considering an EBITDA multiple, we believe the current 15.5x 2022E EV/adj. EBITDA offers solid downside support, in-line with other cloud services providers that do not have an adjacent payments offering.”
Overall, Quisitive’s shareholders have had a positive 2021, with the stock’s price having risen 23.9 per cent for the year to date, reaching a high point of $1.97/share on May 5.
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