TIO Networks (fka TNC)

[junkHustler]

BUY rating and increasing our TP to $2.75 (from $2.00)

TIO NETWORKS CORP. TIO Networks to Acquire Softgate Systems; Transformational Deal (increasing TP)

TNC announced that it will acquire New Jerseybased Softgate Systems for a total transaction value of ~US$31M.

We are maintaining our BUY rating and increasing our TP to $2.75 (from $2.00).

BOTTOM LINE Transformational Deal is Positive.

This transformative and accretive deal creates the largest North American provider of walk-in bill payment services with a pro-forma revenue run-rate of $100M and EBITDA of $10M vs our F2016E of $67M and $8M, respectively. Softgate should add US$37M in revs and US$5M in EBITDA to TIO’s business.

FOCUS POINTS

Immediate Scale. Combined companies processed 70M+ transactions worth US$8B+ in the LTM (vs TIO at ~52M and ~US$6B, respectively).

Plugs a Geographic Hole in the Network. Softgate gives TIO a nice footprint in the northeast US.

F2017E Pro-Forma Looks Interesting. With further revenue and cost synergies, we believe TIO can drive pro-forma F2017E revs of ~$120M and EBITDA of ~$20M.

Key Biller Additions. Softgate’s billers include AT&T, Verizon, Capital One, Dish Network, DirecTV, Comcast, Cablevision, Reliant, Direct Energy, JCP&L, Sprint, T-Mobile and many others.

Ralph Garcea, MBA, P.Eng. [e-mail] [phone] Sales/Trading — Toronto: [phone], [phone]

Read more at http://www.stockhouse.com/companies/bullboard/v.tnc/tio-networks-corp#OBBxVoFMjfqyysHM.99