Digital Assets Play Could Prove ‘Most Valuable’ to its Long-Term Investors

MediaValet Inc. (TSXV:MVP) trades at a discount to its SaaS peers despite having one of the strongest revenue growth profiles, says one analyst

Capital Ideas Media | January 15, 2021 | SmallCapPower: PI Financial analyst David Kwan believes the growth prospects for the digital asset management (DAM) space should make MediaValet Inc. (TSXV:MVP) stock a long-term winner.

(Originally published on Capital Ideas Media on November 17, 2020)

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The Canadian company is focused on the cloud-based DAM market, providing its clients a platform to store, manage, secure and distribute their corporate assets, such as marketing, sales, design and engineering.

[Editor’s Note: Shares of MediaValet have gained more than 9% since Capital Ideas wrote about the company about two months ago.]

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Mr. Kwan believes DAM solutions are a ‘must-have’ for mid-size and enterprise organizations, as the digital transformation has created strong growth in digital assets, with the move from on-premise systems to the cloud allowing digital content to be more accessible for consumers.

The analyst noted that the market for DAM solutions currently stands at about US$3 billion and is expected to grow to US$7.5 billion to US$10 billion by the 2025.

David Kwan is forecasting fiscal 2020 revenue of $7.4 million for MediaValet with adjusted EBITDA of negative $4.1 million. He expects adjusted EBITDA, though, to climb to $5.3 million in fiscal 2021 on revenue of $10.3 million. Mr. Kwan cautions that sustainable adjusted EBITDA for the company won’t happen until 2023 “at the earliest.”

The PI Financial analyst believes upcoming catalysts for the stock include large new customer contracts as well as the company’s quarterly financial results.

And, given the current fragmentation in the DAM space M&A activity could also be in the cards, as he thinks MediaValet is looking at tuck-in acquisition opportunities while also suggesting the company itself is an attractive takeover target.

“On an absolute basis, MVP is not a cheap stock at 8.0x EV/Sales (CY21e) and 5.0x EV/Sales (CY22e). However, it is still trading at a discount to its SaaS peers at ~10x, despite it having one of the strongest revenue growth profiles (with all of the growth being organic),” he said.

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