Moelis & Co Research - CVT - Buy (TP: $0.70)

The company was nice enough to forward me M&C's research report released today.

Covata Ltd (CVT) - Buy
Price: $0.490; Target Price: $0.70

Recent Partnership Agreements Validate the Business Potential
Estimate Changes

Event
CVT announced a number of game-changing partnership agreements, which in our view, are a validation of the platform technology and the business potential. Announcements include partnership agreements with:

- Cisco
- T-Systems (part of Deutsche Telekom)
- Macquarie Telecom

Impact
We have retained our BUY rating and increased our price target to $0.70 to reflect the recent partnership agreements announced.

The signing of the partnerships transitions CVT from commercialisation to revenue generation and as a result a valuation re-rate is appropriate.

CVT estimate that Safe Share will be available for purchase through T-System from April 2015 and initial customer engagement through Cisco has already commenced. Whilst these are positive catalyst, we remain of the view that a ramp up in a sizable level of sales may take some time.

We have performed a valuation that reflects a potential penetration of 5% of T-Systems customer base. This may be conservative and offer significant upside from existing contracts and new contracts.

Note that limited visibility of the quality and timing of earnings makes forecasting challenging.

Investment View
CVT remains a compelling investment opportunity given (1) the strong industry thematic, (2) a leveraged business model driven by large international partnerships and (3) the de-risking of the business model from recent partnership agreements announced.

Clarity over the quality and timing of earnings will be a core catalyst to drive an increase in valuation. Additional contract wins, particularly other Telco's and Managed Service Providers (MSP) will also act as a valuation catalyst and help diversify and drive future earnings.

Full & Very detailed report here.
https://moelis.bluematrix.com/sells...elis&[email protected]&source=mail