In a Jan. 30 research note, Research Capital Corp. Special Situations Analyst Venkata Velagapudi and Research Associate Jack Keating stated that fully integrated technology platform services company Givex Information Technology Group Ltd. (GIVX:TSX), which provides POS, payment processing, gift cards, analytics, and other cloud-based services to merchants in more than 100 countries, entered into a definitive agreement to acquire Kalex Equipment Services.
The report stated that Givex Information Technology Group (Givex) has a major concentrated presence in North America and commented that with the addition of Kalex, the firm will increase its ability to expand installations across Canada.
The analyst wrote that the company has a "high probability of becoming a 'multibagger' in a disruptive industry," as its business it highly focused on delivering profitable growth.
The report from Research Capital explained that other companies in the industry have made efforts to expand revenues and market share at the expense of cash burn and shareholder dilution. Though some of these may become profitable over time, Research Capital stated that it believes that "the companies which grow consistently with a focus on profitability have a higher probability of turning out to be good investments over the long-term, and that Givex falls into this category."
According to the report, Givex started in business over 20 years ago as a technology services provider for an online gift card company with around $60 million in yearly turnover. The analysts stated that the firm's emphasis on steadily generating free cash flow together with is increase in customer locations and average revenue per user (ARPU) is a winning combination.
Research Capital highlighted that more than 98% of Givex's 96,000 customer locations have yet to implement POS and payment processing services, which it sees as an enormous potential for increasing total sales and ARPU.
The Research Capital report stated that at present "Givex is trading at a significant discount compared to its peers based on all the valuation multiples." The firm believes that as Givex increases its revenues and improves profitability, the valuation gap will begin to gradually close.
Research Capital Corp. stated it is initiating Coverage on Givex Information Technology Group Ltd with a "Buy" rating and CA$3.20 target price.
Givex Information Technology Group Ltd. shares trade on the Toronto Stock Exchange under the symbol "GIVX" and last closed for trading at CA$0.85 on Wednesday, Feb. 2, 2022.
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Disclosures for Research Capital Corp., GIVEX Information Technology, Jan. 30, 2022
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1. Relevant disclosures required under IIROC Rule 3400 applicable to companies under coverage discussed in this research report are available on our web site at www.researchcapital.ca
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I, Venkata Velagapudi, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report.
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