Initiation of Coverage KITS Eyecare Ltd. Canadian Equity Research Consumer Products 7 February 2021 Derek Dley, CFA | Analyst | Canaccord Genuity Corp. (Canada) |
[email protected] | 1.416.869.7270 Rating Price Target Luke Hannan, CPA | Associate | Canaccord Genuity Corp. (Canada) |
[email protected] | 1.416.869.6618 BUY C$17.00 Price Growth clearly in focus KITS-TSX C$8.20 Investment Recommendation We are initiating coverage of KITS Eyecare Ltd. with a BUY rating and $17.00 target Market Data price. We believe KITS offers investors attractive exposure to the highly fragmented, 52-Week Range (C$) : 7.55 - 10.20 Market Cap (C$M) : 254.2 high-margin eyecare market. The company’s unique, 100% online-only business Shares Out. (M) : 31.0 model should allow KITS to exceed the average industry growth rate, as e-commerce Dividend /Shr (C$) : 0.00 eyecare penetration is set to accelerate, in our view. The company is run by a Dividend Yield (%) : 0.0 seasoned management team, which together owns ~74% of the shares outstanding Implied Return to Target (%) : 107.3 and has demonstrated prior success in the online eyecare market. We believe the Net Debt (Cash) (C$M) : (36.9) current valuation of 1.3x our 2022E revenue estimate, vs. peers which trade at 2.9x, Enterprise Value (C$M) : 217 represents an attractive entry point. FYE Dec 2019A 2020E 2021E 2022E Revenue Investment highlights 36.9 74.9 116.2 162.2 (C$M) • We believe KITS is well positioned on the precipice of what will be an acceleration EBITDA (C$M) 3.6 6.1 6.1 16.9 of the penetration of e-commerce within the retail eyecare market.