London, UK, 1 December 2020

Checkit (CKT): Initiation - Smarter operations management

Checkit has emerged from a period of corporate activity as a pure-play business focused on driving the adoption of its connected SaaS software, in particular its workflow management application. Checkit's software is designed to enable smarter operations management, exploiting Internet of Things technology to connect people, processes and assets. With a proven ability to sign up blue-chip customers across a number of target verticals, growth in recurring revenues and an expanding customer base should help to close the valuation discount to software peers.

On an EV/sales multiple of 1.4x in FY21e, Checkit trades at a significant discount to the UK software sector (5.1x forward sales). On a sum-of-the-parts basis attributing EV/sales multiples that better reflect the performance and prospects for each division, we estimate that the stock is significantly undervalued. For example, using a 4x FY21e multiple for Checkit Connect and 1x for Checkit BEMS would result in a valuation of 72p per share. Key triggers to help Checkit attract a higher multiple include evidence that customers are signing up to use Connect software, existing customers are expanding their usage and, to a lesser extent, that non-recurring revenues are being converted to subscription services. 

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