Canaccord Genuity has repeated a 'Speculative Buy' rating and $3.00 target price on Think Research Corporation (TSX-V:THNK) shares following recent news the firm has agreed a $25 million convertible loan facility with Beedie Capital, including a $10million immediate cash injection into the company.
In a note to clients, analysts at the brokerage said: "This both alleviates any immediate concern as to THNK’s liquidity position and provides management the ability to entertain further tuck-in acquisition opportunities, though we believe the focus remains optimizing the existing asset base."
They added: "We view the development positively and will factor the new facility into our model updates when the company reports Q4/21 results later this week."
READ: Think Research agrees $25M convertible loan deal with Beedie Capital
The analysts noted that the terms of the loan agreement with Beedie are for 8.5% interest with a 1.25% standby fee on unadvanced portions. The conversion price on the initial $10 million is set at $1.44 per share, a 40% premium to the VWAP, with future tranches expected to be set at a 25% premium and Think has the right to force-convert half of the principle in the event the shares trade 50% above the VWAP, they added.
The analysts noted that Beedie Capital adds another substantial investor to Think’s roster, with the firm managing the alternative investments and assets for Beedie, one of the largest private companies in British Columbia.
With this agreement, Beedie also receives the right to a board observer so long as it maintains $10million in equity investment, and a board seat should it hold a above a 15% equity position.
This agreement follows the $14.1 million financing Think used to buy BioPharma which was led by NorthWest Value Partners. Additionally, the company also increased its credit facilities through an agreement with Scotiabank in September 202 to a total of $28 million plus a $10 million accordion.
The initial $10 million cash injection adds to the $6 million in cash Think Research closed Q3 with, and unused portions of its credit facility - last reported as around $7 million not including the accordion - the analysts noted.
The Canaccord analysts concluded: "While we believe the focus of Think’s management team is primarily streamlining and optimizing its current asset base, the terms of the financing hint at the potential for further tuck-in acquisitions. We believe the renewed focus on the technology and knowledge-based areas within the healthcare industry (vs. healthcare services) would allow Think to leverage its existing technology infrastructure while continuing to differentiate itself amongst HCIT peers."
Contact the author at jon.hopkins@proactiveinvestors.com