Lightspeed POS Inc

Recent Acquisition leads to Higher Geographical Presence: Lightspeed POS Inc (TSE: LSPD) is a Montréal, Canada-headquartered leading cloud-based omni-channel commerce platform services for small and medium-sized enterprises. The business offers an all-in-one solution which supports services like managing day-to-day operations, customer engagement, acceptance of payments etc. to restaurants and the retailers. In 2019, the company acquired of Chronogolf, iKentoo, and Kounta by Lightspeed.

Key Operating Highlights:

• The third quarter of 2020 was marked by client addition through the high-performing retail and restaurant segment. The business acquired several premium clients like Jack Daniels, Danish audio electronics company Olufsen and Bang followed by Michelin-starred restaurant Cleaver East, the premier Canadian Bear Mountain golf resort and 5-star Swiss Walliserhof Grand-Hotel and Spa etc.

• Recently, the group completed its acquisition of Gastrofix, which provides hospitality POS solution services. Currently, the business has a more than 74,000 customer locations worldwide, grew from 47,000 a year ago, including ~8,000 customer locations of Gastrofix. 

Outlook: For Q4FY20, the business expects its revenues in the range of ~US$35 to US$35.7 million, depicting a growth of 64% to 68% on a y-o-y basis while FY20 revenue is anticipated at around US$120 million, representing a growth of ~55% on a y-o-y basis.

Q3FY20 Financial Highlights (for the period ended 31^st December 2019)

Q3FY19 Income Statement Highlights (Source: Company Reports)

For the period ended 31^st December 2019, LSPD posted total revenue of US$ 32.3 million, up 61% on a y-o-y basis and came in higher than the guidance. The growth in the top-line was driven by a solid 58% y-o-y growth from the recurring software and payments revenue. Gross margin rose to 64%, with gross profit on revenue increasing by 46% against the previous year quarter. The company lowered its net loss to US$ 15.8 million from a net loss of US$71.1 million in the previous corresponding period. On 31^st December 2019, the group had $126.7 million in cash and cash equivalents.

Valuation Methodology: EV/Sales - Based Relative Valuation

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock closed at CAD 15.6 with a market capitalization of ~CAD 1.21 billion. The business is a Leading omni-channel commerce-enabling SaaS platform for complex SMBs, with substantial growth profile and scalability. The recent acquisition of Gastrofix would lead to higher geographical presence for the company and a premium customer base. The business has managed to improve its profitability while the business will focus on multiple levers to continue its growth trajectory. We have valued the stock using EV/Sales based relative valuation method. We have taken peers like Real Matters Inc (TSX: REAL), CGI Inc (TCX: GIB.a), etc. and arrived at a target price which is offering a double-digit upside return (in % terms). Hence, we recommend a ‘Buy’ rating on the stock at the closing market price of CAD 15.60, up 19.36% on 24^th March 2020.

LSPD Daily Technical Chart (Source: Thomson Reuters)

Sienna Senior Living Inc.

Decent Growth Prospects Driven by More Than 98% of Occupancy rate: Sienna Senior Living Inc. (TSX: SIA) is Canada-based seniors' living providers. With high-quality assets in great locations, the company is one of Canada's leading owners and operators of seniors’ residences. The business offers a full range of seniors' living options, which includes independent living, assisted living, long-term care, and specialized programs and services while the group also provides expert management services. The business consists of 35 Long-term Care Residences (LTC) with 6,868 beds, 27 Retirement Residences (RR) with 3,283 suites and 13 Managed Residences (LTC & RR) with 1,460 beds/suites. 

Key Highlights and Management Commentary:

• The Management highlighted that it is well prepared to manage the current environment and minimize any impact, and it is taking Active screening protocols for coronavirus (COVID-19) and influenza.

• The Management further expects that occupancy across the retirement portfolio could be temporarily impacted while the company fundamentals will remain strong. For the last five years, the business has a strong track record of more than 98% occupancy rate in long-term care portfolio in the last five years.

• More than half of the company’s long-term care beds are located in the GTA (Greater Toronto Area), Canada's largest real estate market while the business has a portfolio within Ontario and British Columbia. This is a well-located portfolio in highly desirable nodes. 

• Amidst the containment of COVID-19, the Government of Ontario has assigned CAD 50 million as emergency funding for long-term care and CAD 5 million for retirement residences. The group believe that these assistances is likely to help the business. 

• Through strategic acquisitions, the company is planning to expand its retirement portfolio in main Canadian markets. Sienna is on-track for long-term growth with a robust balance sheet, financial flexibility, favorable credit ratings and sustainable dividend. 

Financial Highlights for FY19

Key Financial Highlights (Source: Company Reports)

SIA announced its full-year results, wherein the business reported revenue of CAD 669.73 million, as compared to CAD 641.98 million in FY18. Net operating income stood at CAD 156.86 million vs CAD 151.21 million in the previous financial period. Adjusted Funds from Operations stood at CAD 93.18 million, as compared to CAD 93.06 million in FY18. Debt to Adjusted EBITDA stood at 6.7x at the period end against the 6.9x in FY18. 

Stock Recommendation: The stock of SIA is quoting at CAD 10.12 with a market capitalization of CAD 675.97 million. The 52-weeks low and high of the stock stood at CAD 9.00 and CAD 20.35, and currently trading at the lower band of its 52-week trading range,  which means that the stock has a potential to go upside at the current price level. The stock corrected by ~44.88% in the last one year. The stock is available at an Enterprise Value to Sales of 2.5x on a TTM basis, as compared to the industry median of 1.3x. The senior residence sector offers Significant growth potential due to compelling industry fundamentals and is characterized by high barriers to entry and requires licensing and experienced operators. As per the macro prospects, the industry is expected to more than double over the next 20 years, aided by a growing aged population and increasing affluence among seniors. The company has reported a decent financial performance during the financial year 2019. The company has a growing sales pipeline, strong EBITDA margin, and healthy cash balances.

The business is well placed to take advantage of the higher demand while maintaining its high occupancy rate in future. Going forward, the company seek its growth through development, strategic acquisitions & organic expansion. Considering the high occupancy rate, improved financials, industry scenario, recent price correction and valuation, we recommend a ‘Speculative Buy’ rating on the stock at current market price CAD 10.12, up 8.00% on 24^th March 2020.

SIA Daily Technical Chart (Source: Thomson Reuters)

Disclaimer

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