Westwind initiates on Nightingale Informatix

It has been a few months since Wellington Financial Fund III closed a $12 million acquisition financing with Nightingale Informatix (NGH:TSXV). We syndicated half of the deal with Export Development Canada. With Vantagemed under their belts, Sam and his team are starting to get Bay Street’s attention. Here is the most recent research coverage, in the form of a new report from the tech research star at Westwind Partners. Here’s an exec summary of what they put out today:

“???? Nightingale provides software-as-a-service workflow and records applications to medical clinics and hospitals.

???? The company’s key opportunity is to leverage its leading-edge technology into its large, recently acquired U.S. customer base.

???? We are initiating coverage with a SPECULATIVE BUY rating and a one year target of $1.10.

Analysis

Nightingale provides software-as-a-service medical practice management and electronic records applications to the North American healthcare industry. The company has won key contracts in Canada, such as with the Province of Nova Scotia, and has rapidly expanded into the U.S. by way of three acquisitions.

Nightingale has only recently begun to leverage its proven applications, including electronic medical records, into its acquired U.S. installed base of over 6,500 medical clinics, which should drive licence and recurring maintenance revenue growth for the next few years. Over the last quarter, Nightingale has worked to integrate the VantageMed acquisition (closed in April 2007), drive out costs and build its pipeline of EMR opportunities in the U.S. Early signs of progress are promising.

In terms of catalysts, next quarter we are watching for improved EBITDA as the integration program takes hold, and for large EMR contract wins, particularly in the U.S. market.

Conclusion

While their strategy is still in its early stages, Nightingale is working to build its sales pipeline and drive organic growth by leveraging its U.S. installed base. Recurring revenue currently stands at 65% of total revenue. However, given the lack of profitability and debt level, we are initiating coverage with a SPECULATIVE BUY rating and a one-year target of $1.10, using a 2.5x
EV/Sales multiple.”

MRM
(disclosure – Fund III owns warrants in NGX)