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Plurilock Security has a 186 per cent upside, says Leede Jones Gable

Leede Jones Gable analyst Greg McLeish reviewed the latest acquisition by Canadian cybersecurity company Plurilock Security (Plurilock Security Stock Quote, Charts, News, Analysts, Financials TSXV:PLUR) in an update to clients on Tuesday, saying the cybersecurity space should continue to benefit from increased government and private business investment. 

Vancouver-based Plurilock, an identity-centric cybersecurity solutions provider, announced on Monday that it has acquired all the issued and outstanding shares of Integra Networks Corp, a cybersecurity and IT solutions company to the private and public sectors. Terms of the deal include a purchase price of $1.2 million to be funded via a combination of shares, cash on hand and milestone-driven earnouts. 

Founded in 1985, Integra has the Canadian federal government as a primary client, having served over 50 organizations over the last three years and a trailing 12-month revenue of $5 million with 19 per cent gross margins.

“We are excited to become a part of the Plurilock family of companies,” said Nagwa Koressa, President of Integra, in a Plurilock press release on Monday. “Plurilock’s approach to customer success is the perfect fit for Integra’s service-focused model. This acquisition brings with it a tremendous number of benefits to our loyal team and our customers, including the opportunity to become a part of an award-winning global cybersecurity company that is developing cutting-edge zero trust identity technology.”

Looking at Plurilock’s latest moves, McLeish said the company continues to actively pursue strategic acquisitions with an active M&A pipeline and that the company’s balance sheet remains strong, with PLUR having closed this past November on a $4.6-million bought deal public offering including over-allotment.

“The proceeds from the offering are expected to be used for general working capital, research and development, marketing and general corporate purposes. As a result of the offering, we forecast that the company has a cash position of approximately $5.0 mm at the end of 2021,” McLeish wrote.

McLeish pointed to the global cybersecurity spend on products and services which is expected to grow by 15 per cent CAGR between 2021 and 2025 to US$1.75 trillion cumulatively. He noted that US federal agencies issued a joint cybersecurity alert in January of this year on “Russian Cyber Threats to U.S. Critical Infrastructure,” with the report isolating a number of sectors of the economy as being key targets, including defence, healthcare and public health, energy, telecommunications and government facilities. 

He also pointed to the government of Canada’s recent announcement of $80 million in funds for a Cyber Security Innovation Network, the 2021 Federal Budget which proposed allocating $330.6 million and $456.3 million over five years to defending taxpayer information against digital breaches and enhancing and protecting its cyber networks, respectively and also the National Cyber Security Action Plan which has allocated a commitment of $507.7 million between 2019 and 2024. 

“This demonstrates that the Canadian government intends to make significant investments in cybersecurity and IT technology to support the initiatives outlined in the plan,” McLeish said.

With the update, McLeish has update his financial forecast for Plurilock, calling now for 2022 and 2023 revenue of $49.4 million and $57.3 million, respectively, and 2022 and 2023 EBITDA of negative $4.1 million and negative $3.5 million, respectively.

McLeish reiterated his “Buy” recommendation for PLUR and $1.00 target price which is based on a 1.2x multiple of his 2023 revenue estimate and at press time represented a projected one-year return of 186 per cent.

Disclosure: Plurilock Security Inc is an annual sponsor of Cantech Letter.

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