Nanalysis Scientific Corp. (NSCI:TSX.V; NSCIF:OTC; 1N1:FSE) will complete a CA$3.5 million (CA$3.5M) non-brokered private placement to bolster its balance sheet, reported Echelon Capital Markets analyst Stefan Quenneville in an April 24 research note. Based on dilution from the deal, updated estimates, and reduced peer multiples, Echelon lowered its target price on the scientific equipment firm to CA$1.90 per share from CA$2.75.
"Nevertheless, we are maintaining our Buy rating as the company's impressive longer-term growth trajectory remains intact, and the stock price remains significantly undervalued compared to its peers," Quenneville wrote.
Nanalysis' current stock price is about CA$0.60 per share. Though Echelon reduced its target price, the potential return for investors is still significant, at 217%.
Need for Capital
Nanalysis develops, manufactures, and sells compact nuclear magnetic resonance (NMR) spectrometers and magnetic resonance imaging (MRI) equipment.
The Alberta-based company, Quenneville explained, needs capital to fulfill its CA$160M service and maintenance contract with Canada Air Transportation Security Authority (CATSA) to support imaging and other security screening equipment. For instance, Nanalysis has to hire about 120 workers, train staff and get them security clearance and start phasing in operations at Canadian airports, for a total of 80.
With the capital raise, the company plans to issue 5,830,000 units at a price of CA$0.60 per share. Each unit consists of one common share and one warrant, with a CA$0.80 exercise price and a one-year expiration.
Perceived Delay
The fact that the private placement was just announced suggests the "rollout is progressing more slowly than initially planned," wrote Quenneville. This means the company has likely fallen behind on its original timeline, which was to reach a CA$2M per month revenue run rate and become cash flow positive by mid-2023.
Accordingly, Echelon reduced its estimates for Nanalysis for the next several quarters. For the full-year 2023, its new revenue forecast is CA$45.6M, down from CA$50.9M, and its revised EBITDA projection is (CA$0.4M), reduced from CA$8.5M. Despite the delay and revised estimates, the Nanalysis story remains bright, according to Quenneville.
"We note that this still represents an impressive 86% year-over-year growth," he pointed out.
| Want to be the first to know about interesting Technology investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
