DCM and MCC Merger Closes and Leaps Forward with $26.1M Financing & $23.1M Facility Sale
DATA Communications Management is a Canadian-based provider of marketing and business communication solutions to companies in North America. Its technology-enabled content and workflow management capabilities solve the complex branding, communications, logistics, and regulatory requirements of leading enterprises so its customers can accomplish more in less time. Its services include printing, data & content management, labels & asset tracking, location-specific marketing, and multimedia campaign management. (1.0) COMPANY UPDATE: DCM reported five recent events that were positive for the Company's valuation, according to our model. (1.1) On March 21, DCM reported final full-year financial results for 2022 with Q4/2022 Revenue and Gross Margins that exceeded our estimates. (1.2) On April 25, DCM announced the completion of its acquisition of Moore Canada Corporation (MCC). We believe this transaction enhances DCM's capabilities and growth potential. MCC has a highly complementary operating model and is expected to add new products, services, and technology capabilities. (1.3) On May 10, DCM reported first quarter 2023 financial results with Q1/2023 Revenue that exceeded our estimate by $3.4 million. (1.4) On May 25, DCM announced the closing of a $26.1 million Equity Raise to help fund the merger and improve the Liquidity and Leverage ratios. (1.5) On June 8, DCM announced that it completed the sale and leaseback of its warehouse facility in Oshawa for $23.1 million. It was an important step to pay down a portion of the loan obtained as part of the MCC acquisition. (2.0) FINANCIAL ANALYSIS & VALUATION: (2.1) We updated our model with the Company's recent financials and adjusted our model to incorporate the merger with MCC. (2.2) We estimate an equal-weighted price target of $6.90 based on a DCF valuation ($10.16/share), a Revenue Multiple valuation ($6.24/share), and an EBITDA Multiple valuation ($4.40/share). (2.3) We are maintaining a Buy rating and increasing the one-year price target to $6.90 from $4.50.Data Communications Management is an unincorporated, open-ended, limited purpose trust. Through its subsidiaries, Co. is engaged in the provision of total document management solutions including printed products. Co. offers a variety of print and electronic products and related services, which include traditional business forms, labels, direct mail products, security documents, commercial print, and facility and print management.
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