Research report from Baillieu Holst published on the 28th of...

Research report from Baillieu Holst published on the 28th of April:

Envirosuite (EVS) Recommendation: BUY
Target price: $0.14.

•   Sale of EC business for $15m: EVS has announced the sale of its Pacific Environment Consulting (PEC) business to Environmental Resources Management (ERM), a global provider of consulting services on environmental, health, safety, risk and sustainability matters. The sale price is $15m, with EVS agreeing to set aside $500k to incentivise employees of PEC.
•   Partnership with ERM: Subsequent to the sale, EVS will partner with ERM to provide monitoring and reporting solutions to its clients. ERM has a global reach, with 160 offices in 40 countries, 4,500 employees and has worked with more than half of the Global Fortune 500 companies over the past three years.
•   Excellent result for EVS: We believe this is an outstanding result for EVS. It has sold the PEC business for a good price (we valued the business at $17m) and gained a very strong channel partner to drive sales of its Envirosuite SaaS product. The sales proceeds will be used to further develop and sell Envirosuite, which all but eliminates the need for a capital raising in the medium term.
•   Investment view: EVS indicated that the Envirosuite platform generated $1.7m revenue in FY16, with an EBITDA loss of $3.3m, representing revenue growth of 30-40% over the past few years. We believe these strong growth rates will continue, as sales personnel have been relocated to key regions (US, Europe) over the past 12 months. EVS now has the capability to expand its salesforce and promotional activities. The current cash backing of around $15m is equal to the current market cap. We value the SaaS business at $10-12m, which implies a share price of 0.14 in the short term. BUY maintained.