Laurentian Bank Securities analyst Nick Agostino remains certain about Sylogist (Sylogist Stock Quote, Chart, News, Analysts, Financials TSXV:SYZ), maintaining a “Buy” rating with a target price of $16/share for a projected return of 48.3 per cent in an update to clients on Wednesday.
Calgary-based Sylogist provides SaaS solutions primarily to education, nonprofit and NGOs and government verticals, with a global user base of nearly 2,000 customers.
Agostino’s new analysis comes after Laurentian Bank hosted virtual marketing meetings with Sylogist management on Tuesday, which he viewed as a positive.
According to Agostino, the company reaffirmed its expectation of achieving organic growth in the high single digits, though they noted the growth would be back-end loaded. Sylogist has taken positive steps in that direction, reporting four per cent organic growth in its most recent quarterly results compared to a nine per cent loss in the previous quarter.
Agostino noted that the company also has approximately $26 million in contract backlog, including $20 million in COVID-based pent-up demand that is expected to drive SaaS upgrades with existing clients over the next two to three years, with an additional $6 million in recently signed contracts in November that were only minimally recognized in Sylogist’s financial results.
“Regarding the recent contracts, we note implementation times are typically 2-12 months, giving us comfort of a full contribution in F2022 and helping deliver the targeted organic growth for the year,” Agostino said.
Sylogist has also recently completed a revision to its strategy and cost structure which will see increased spending to drive more meaningful sustainable organic growth, having expanded its sales and marketing team from two to 11. With a three to four-month ramp-up period in play, Agostino expects those sales hires to start contributing to the top line in the second half of 2022, and the company has been on a roll in terms of acquiring tech talent, whether it was through three M&A deals in the last 12 months, networking or offshoring.
The company also has plenty of capital power at its disposal with a $125 million credit facility compared to $13 million in net debt, paired with as many as 15 potential acquisition targets in its pipeline.
“As we continue to execute and focus relentlessly on selling to our ideal customer profile, we remain confident that we can deliver on our growth objectives,” said Bill Wood, President and Chief Executive Officer of Sylogist in the company’s February 10 earnings conference call. “With our increased line of credit, we have ample access to dry powder to continue to acquire and integrate meaningful strategic assets. With the acquisition of Mission CRM and Pavliks this quarter and Municipal Accounting Systems seven months prior, we are proving that we are proficient at identifying, closing and integrating high-quality strategic companies.”
Over the last 12 months, Sylogist’s stock price has sunk by 11.3 per cent, and 14.4 per cent since the calendar turned to 2022. The company enjoyed a 52-week high of $17.75/share on April 27, only to fall to a 52-week low of $9.99/share on October 12.
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