The value of mdf commerce's assets is well above the stock market value of the Longueuil company, according to a shareholder who senses change coming as mdf holds its annual meeting this week.
Posted yesterday at 6:00 a.m.
RICHARD DUFOURTHE PRESS
The e-commerce platform operator's stock has lost almost 90% of its value since peaking last year. So much so that the company is now only worth 100 million.
"The entities inside the structure are worth more than the title", launches the portfolio manager Philippe Hynes, of the firm Tonus Capital.
Last spring, Long Path Partners, a private investment firm in Connecticut, saw an opportunity and acquired a greater than 10% stake in mdf.
“I wouldn't be surprised if other strategic investors and private funds are watching this,” says Philippe Hynes.
“There is great value. There is something to do. It's not a broken business. I continue to like the value of the title,” adds this shareholder.
Hard time
Philippe Hynes agrees that mdf is going through a difficult period. “The results were worse than expected. It's a very neglected title right now,” he observes.
He says he expects operations to refocus more on profitable business lines and corporate messaging and communication to improve.
According to his assessment, mdf's assets deserve at least twice the current value assigned by investors.
The market does not value the sum of the parts for its value. There are certainly companies or external funds that will look at this and find it interesting at the current level.
Philippe Hynes, of the firm Tonus Capital
“The timing of such an eventuality still remains uncertain, but I wouldn't be surprised if something happened in the next few months. »
The company paid $260 million last year to buy Periscope, an online procurement platform serving US government agencies. It was the largest acquisition ever by mdf.
The market no longer being what it used to be, Periscope is possibly no longer worth 260 million on the market today, admits Philippe Hynes. “But is it worth half of what was paid? Even if it is only 50% of the price paid last year, it is the equivalent of the current value of mdf in its entirety! »
Three segments
The activities of mdf commerce are grouped into three segments.
Periscope fits into the e-procurement platform alongside the businesses of Merx and Bidnet subsidiaries. Philippe Hynes estimates the activities of this platform between 150 and 200 million including Periscope.
The unified commerce platform (Orckestra and k-ecommerce) is the one that has experienced difficulties recently, underlines Philippe Hynes. This platform nevertheless generates annual revenues of 40 million. It is therefore worth around 60 million in the eyes of Philippe Hynes.
Finally, the electronic marketplace platform (Jobboom, Rseau Contact, Carrus, etc.) is smaller, but profitable with 16 million in annual revenue. Philippe Hynes assigns a value of 30 million to this segment.
Excluding the $35 million debt, he estimates that mdf stock should trade around $5 a share, but adds that it would take an attractive premium to convince shareholders if a takeover offer is filed. .
“But the timing of it all, when someone will realize it, remains a question mark,” he says.
In the short term, he believes that mdf needs to increase its profits quarter over quarter. “And in the medium term, maybe value will be realized in another way. »
Rapid "development" may not materialize, he warns, and the title could remain "forgotten" and "under the radar" for a while yet. “Eventually though, there is a way to realize value. »
After hovering around $17 on the Toronto Stock Exchange in February last year, mdf's stock fell as low as $1.50 this summer before rising to its current level of $2.
“We can see that there are changes taking place with the recent appointment of three new directors [two directors joined the board in June and a Long Path representative will be elected on Tuesday]. »
The arrival on the board of a representative of the American institutional investor is a favorable signal, underlines Philippe Hynes.
The Fonds de solidarit FTQ (13.6%), Investissement Qubec (12.2%) and Long Path Partners (11%) are the three largest shareholders of mdf commerce.
Mdf shareholders are invited on Tuesday to participate in the company's annual meeting in virtual mode.
Only two of five analysts looking at mdf recommend buying the stock. Analyst Nick Corcoran of Acumen Capital stopped offering the buy in July. He then cited the short-term risks associated with the business model, and preferred to wait for leaders to demonstrate that “profitable growth” can be generated.