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Constellation Software Inc. (CSU $4,844.17)
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Kraken Robotics Inc. (PNG $3.75)
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Topicus.com Inc. (TOI $182.00)
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Lumine Group Inc. (LMN $52.03)
- What was the catalyst in mid-2024 that finally created a break-out in stock price?
- Why is it such a high-conviction 5i Research stock now compared to back a few years ago ?
- Do we know anything about the quality of management?
- What is the quality of the balance sheet ?
- How out of line is the current valuation of this stock ?
- Does it have similar runway potential that a LMN and TOI might have (with reference to success of CSU) ? ......acknowledging of course that they are in different sectors.
1) 2023 to 2024 saw a big bump in sales and a transition to profitability. The company also raised money and more investors got interested as they could now buy shares. It demo'd some new products and announced several new contracts and customers. 2) PNG a few years ago was a tiny company with about $40M in sales. Risks were high, it was losing money and had negative cash flow. Today, sales are $125M (2025E) and it has a good backlog and new contracts. We are more confident in its survivability and growth. 3) Management has managed growth well. It is a tough business with a long sales cycle and harsh customers. But its order success is testament and the company has done appropriate and timely financings. 4) It is 43X earnings and about 4X 2026 sales. We would consider this in line with high growth small caps. Still, expectations are high especially after the new financing. 5) Software is a higher margin business and the companies noted have basically grown via acquisition of companies and cash flow. PNG will be more internally-driven, and contract wins may be 'chunky'. We would not really expect the same type of performance. If PNG gets significantly larger we imagine it will be an M&A candidate before getting to the level of the other companies mentioned.