Topicus is my Top Pick, says this portfolio manager


You may not know the name, but the software company (Topicus Stock Quote, Charts, News, Analysts, Financials TSXV: TOI) has been a resounding success so far in his race for the junior board of TSX. How good is that? The stock has roughly doubled since it emerged in February as a spin-out of the preeminent Canadian software consolidator Constellation Software (Constellation software stock quote, charts, news, analysts, TSX financial data: CSU).

And while CSU is certainly an entity known to most tech investors, the Topicus spinout should grab your attention even with the big wins it has made this year. That’s what Jason Del Vicario of Hillside Wealth Management says, who just named Topicus as one of his top picks for the next 12 months.

“Topicus is going to do exactly what Constellation Software did, but of course they’re smaller, so we think they can probably grow a little faster than the parent company,” Del Vicario said, speaking on BNN Bloomberg. Wednesday.

“Constellation Software has a market cap of around $ 45 billion, but it’s a company listed on the Venture Exchange, which is quite interesting. It’s very well done, ”he said.

The history of Topicus dates back to 2013 when Constellation made the major purchase of Total Specific Solutions of the Netherlands for 240 million euros, a company which, like CSU, focuses on acquiring small companies with positions strong in niche software markets, with TSS working in the healthcare, government and finance sectors at the time.

Fast forward to May of last year and Constellation, through its operating group TSS, purchased the Dutch diversified vertical market software provider Topicus and then placed the two companies under the group of operating called with the intention of registering as a public company.

“We have been following the impressive development of Topicus since its inception in 2001,” said Robin van Poelje, CEO of TSS, in a press release in May 2020. “The company has grown through acquisitions, but mainly from organic way. Its portfolio is not directly competitive with ours. The two companies will operate independently in our decentralized organizational model.

The goal of a public listing was met this year in February after Constellation sold around 39 million Topicus shares to CSU shareholders, while Constellation itself retained around 30% of TOI.

Del Vicario said the creation of could be a repeat feat for Constellation given the success of TOI.

“The people who ran Topicus and TSS wanted a separately listed entity, so that they, in their clients and employees, could take pride in the fact that it was still some sort of separately listed company focused on Countries. – Low, but owned by constellation software, therefore constellation software, clearly saw enough value in the prospect of combining the two and running them, ”said Del Vicario.

“We strengthened our position on the $ 70 weakness and it has since climbed to around $ 140 and it has pulled back a bit,” he said. “We would like to strengthen our position at lower prices. And we also suggest that Constellation Software can do more in the future. It’s been a very successful spin-out for them, so we expect more of that in the future. “

In numbers, Topicus released its second quarter 2021 results in early August, showing revenue up 54% year-on-year with organic growth of 8% to 178.2 million euros. Net income amounted to € 168.8 million or € 0.11 per share compared to € 14.1 million or € 0.12 per share a year earlier.

The company said a number of acquisitions were made during the quarter for a cash consideration of 5.2 million euros while since the end of the quarter Topicus has entered or entered into agreements to acquire d ‘other companies for a total amount of 49.6 million euros.

Topicus debuted on the TSX Venture Exchange on February 2 at $ 66 per share and has mostly trended upward since then, hitting a high of $ 140.65 on September 16.

Normally taciturn about his company’s affairs, Constellation Software CEO Mark Leonard made a statement about Topicus when it was acquired by CSU and TSS last May, saying that TSS and Topicus “didn’t want their legacy disappears in the throat of an omnivorous conglomerate. ”, And Constellation would therefore give the newly merged company autonomy as well as identity, with a public listing serving to support these ends.

“I can’t think of another software company in the vertical market that has grown to the size of Topicus without utilizing outside shareholder funding,” Leonard said in a May 20, 2020 press release. “I have looking forward to spending more time with the founders of Topicus as travel becomes easier. I’m an old dog, but I’m sure they have some new tricks to teach me. Most importantly, they have experience and practices that can benefit all of Constellation’s operational groups. “

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