GMP sees triple in Softchoice Corp.

This GMP Securities research note caught my eye. A tech company with the chance for a triple? That’s Softchoice (SO:TSX):

Softchoice Corp. BUY

SO-TSX
C$3.85 Target: C$9.50

Building for 2010 – Initiating Coverage with Buy Rating

. IT Spending to Rebound: Our discussions with IT professionals and published reports suggest IT spending may have bottomed and should gradually recover through 2010. As a software reseller, Softchoice should see increased business.

. Microsoft Upgrade Cycle Near: The next upgrade to Windows is expected to be released in October and should stimulate business in 2010. Microsoft represents about 33% of Softchoice revenue and more than 50% of gross margin.

. Cost Structure: SO acquired three businesses in late 2007, 2008. Following cost cutting in the past six months, we believe Softchoice has a more appropriate cost structure.

. Forecasts above Street: Our forecasts of EPS US$0.35 in 2009, $0.75 in 2010 are generally above Street views.

. Risk: Trends in cloud computing and new web-based programs like Salesforce.com represent a potential risk of disintermediation for resellers.

. Target of C$9.50 based on 11x 2010 EPS of US$0.75 and C$ at US$0.85. We initiate coverage with a BUY rating.

MRM