Clarus research on Nightingale Informatix

More news from Clarus Securities on Fund III portfolio company Nightingale Informatix (NGH:TSXV):

“This morning, Nightingale announced a contract with the Government of the Northwest Territories to supply EMR/PM solutions to 150 doctors and healthcare providers in the territory. The contract has an initial value of $600,000 and pending success at two pilot sites in Fall 2007, has the potential to be rolled-out territory-wide for $2 million over the next several years. We view this win as positive as it represents a new customer and evidences the robustness of the Company’s solution.

On a valuation basis, US comparables Quality Systems (QSII-Q) and Allscripts (MDRXQ) are trading at 5.7x EV/S on FY08e (ending March-08) and 4.4x FY07e, respectively.

Consensus estimates have these two organically growing at ~30% year-over-year on larger-sized hospital wins. We view NGH’s current valuation favorably at 1.0x EV/S on our FY08 estimate which includes US organic growth of ~18% year-over-year (82% of total revenue). We apply a 2.5x EV/S multiple to our FY08 forecast of $31 million to get our target price of $1.10 per share.

We maintain our SPECULATIVE BUY recommendation.”

MRM