In a Dec. 6 research note, analyst Pardeep Sangha reported Haywood Securities initiated coverage on TECSYS Inc. (TCS:TSE) with a Buy rating and a CA$19 per share 12-month target price. The stock is currently trading at around CA$13.55 per share. The company provides supply chain management software and solutions to the healthcare and complex distribution sectors.
"TECSYS is a profitable, growth-oriented technology company that also has a consistent record of increasing its dividend," Sangha indicated.
According to Sangha, the reasons Haywood likes the company as an investment include:
1. Return to growth. Sangha noted that Haywood forecasts revenue growth for TECSYS of 10% in FY19 and 18% in FY20, in part due to increased healthcare spending and effects of the Democratic wins in the recent mid-term elections. Other growth drivers will be the company's acquisition in November and its successful launch of a hospital pharmacy module in October.
Another indicator of future growth is a record backlog of signed but not delivered contracts at the end of Q2 FY19 (Oct. 31, 2018). At that time, the backlog value totaled CA$51.7 million, versus CA$42.4 million a year earlier. Also year over year, the company had increased bookings from existing clients by 196%.
2. Renewed concentration on acquisitions. In November, TECSYS acquired OrderDynamics for CA$13.4 million. Sangha described it as complementary to the company's core business, providing cross-selling opportunities and immediately boosting revenue in Q3 FY19 by about CA$7 million.
3. Strong balance sheet. At the end of the same quarter, TECSYS had CA$21.7 million in cash and no debt, positioning it well for future acquisitions and a possible dividend increase.
4. Large market opportunity. TECSYS has an estimated CA$9.6 billion opportunity in the healthcare market alone. However, to date it has captured only an estimated 6% share of the 500 healthcare systems in the U.S. and penetrated its own accounts by 12%.
5. Solid track record. For the past six years, market researcher Gartner has categorized TECSYS as "visionary" in warehouse management. The tech company is led by an "experienced management team," with Peter Brereton having been its CEO since 1998. Peter's brother, Dave Brereton, founded the company and is the board's executive chairman. In addition, "management's interests are aligned with shareholders," noted Sangha.
6. Current good entry point. Sangha highlighted that TECSYS' current share price "presents a buying opportunity for investors," because it has dropped from its high of CA$17.50 in August due to general market sell-off, and the company's future prospects look good.[NLINSERT]
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Disclosures from Haywood Securities, TECSYS Inc., December 6, 2018
Haywood Securities, or certain of its affiliated companies, may from time to time receive a portion of commissions or other fees derived from the trading or financings conducted by other affiliated companies in the covered security. Haywood analysts are salaried employees who may receive a performance bonus that may be derived, in part, from corporate finance income.
Haywood Securities, Inc., and Haywood Securities (USA) Inc. do have officers in common however, none of those common officers affect or control the ratings given a specific issuer or which issuer will be the subject of Research coverage. In addition, the firm does maintain and enforce written policies and procedures reasonably designed to prevent influence on the activities of affiliated analysts.
Analyst Certification: I, Pardeep S. Sangha, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Other material conflict of interest of the research analyst of which the research analyst or Haywood Securities Inc. knows or has reason to know at the time of publication or at the time of public appearance: n/a.