A new capital raise looks good on Canadian digital asset management company MediaValet (MediaValet Stock Quote, Charts, News, Analysts, Financials TSX:MVP), according to Eight Capital analyst Christian Sgro. In an update to clients on Tuesday, Sgro reiterated a “Buy” rating on the stock, saying diversification is a strength for MVP going into the new year.
Vancouver-based MediaValet, which offers cloud-based digital asset management (DAM) built on Microsoft’s Azure platform, announced on December 30 a $3.0 million private placement consisting of 2.3 million units at $1.30 per unit. Standing at a 15 per cent premium to the December 29 closing price and a nine per cent premium to the volume weighted average for the past five days, the raise is for $3.0 million, with each unit comprised of one share and one share purchase warrant. MediaValet said the proceeds will be used for general working capital.
Expected to close during the first quarter of the year, the private placement is being subscribed for entirely by company insiders, including key shareholder Shen Capital and company CFO David Miller, increasing Shen’s ownership to 22.3 per cent on an undiluted basis of 25.6 per cent on a partially diluted basis.
Sgro said the insider commitment is a good sign for MVP.
“We believe this capital raise in combination with a $7 million credit facility (which was undrawn as at September) paves a clear path to cash flow breakeven as a function of scale and operating discipline. We like that management now has increased flexibility to pursue our estimated 30 per cent+ organic growth against a large DAM market opportunity internationally,” Sgro wrote.
Sgro said the added capital will strengthen MediaValet’s balance sheet without “meaningfully” diluting current shareholders.
“After doubling headcount in 2021, the company has since demonstrated a high degree of cost discipline which gives us confidence in the path to cash flow breakeven as a function of scale. Contracted R&D work and a relatively short sales cycle give management a higher degree of discretion around the budgeting process and the cost profile,” he said.
MediaValet hit a high of just over $3.00 per share in early 2021, but then the stock dropped steadily to around $1.30, where it has been trading for the past half-year. MVP finished 2022 down 44.5 per cent.
Sgro reiterated a 12-month target price of $2.50 on MVP, which at the time of publication represented a projected one-year return of 125 per cent.
“We like MediaValet’s diversity across verticals, spanning sports teams, chemical/ industrial, and technology, highlighting a wide TAM and opportunity globally. We have not updated our model with this note; we estimate ~30 per cent top-line growth in the seasonally strong Q4/22 which we expect the company to report in March 2023,” Sgro wrote.