TIO’s Softgate buy seen as transformational

TIO is a cloud-based bill payment processor.

TIO Networks Corp.’s announced acquisition of Softgate Systems Inc. won’t likely close for some more months, but it won’t hurt if investors in TIO, a cloud-based bill payment processor, wish to start adding to their holdings ahead of time, says Kris Thompson, analyst at National Bank Financial.

“The stock will likely not rally an excessive amount of more ahead of the deal closing,” Thompson said in a note to clients. “We\’d be inclined to pick away at the stock ahead of the deal closing, which we percieve as likely, although distant.”

Thompson maintained his speculative outperform rating on the Canadian small-cap stock and left his price target unchanged at $1.50, addressing upside of just above 42 per cent based on TIO’s current share price of $1.06.

The analyst thinks, however, that the stock may go as high as $1.70 once the Softgate purchase closes sometime at the end of this year following a lengthy process of being granted government approvals.

He known as the deal transformational and said it was favourably priced for shareholders who are able to expect much more acquisitions down the road.

“We still see TIO being an industry consolidator with increased M&A in calendar 2016,” he wrote.