IDEAS: Noble Iron Inc.’s (TSXV: NIR) Software-as-a-Service (SaaS) business for
the equipment rental industry has a growing recurring revenue base and profit
introduced Noble Iron to our list of Top Ideas for Investorfile just four
months ago. Since that blog post (See: Noble
Iron is an attractively valued SaaS company with cash), the stock is
trading over 100% higher in value. Based on 2020 annual and 2021 Q1 financial results
released subsequent to our introductory post, we understand why the shares are
worth a lot more now.
Iron Inc. (TSXV: NIR - C$0.60), through its wholly owned subsidiary Texada
Software (based in Guelph, Ontario), has been scaling its Software-as-Service
(SaaS) business. Texada offers cloud software solutions for equipment rental
companies, equipment dealerships, construction companies, contractors, and
customers who own or use construction or industrial equipment.
Company’s flagship product is a rental management software application called
Systematic Rental Management (SRM), which automates the functions for an
equipment rental business in the areas of inventory management, purchases
orders, counter operations, work orders and maintenance schedules. Texada has
also developed stand-alones or add-on options to its existing SRM, called
FleetLogic, Gateway and Texada Pay, providing more software service offerings
to the same customer base.
In Management Discussion and Analysis
(MD&A) filings over the past several quarters, the Company had stated that
its anticipates an upward trend for rental companies to increase the use of the
Company’s cloud software solutions, both through conversion from on-premise
customers to the cloud offerings, and through uptake of new customers. Revenues
reported in recent financial results provide confirmation that this occurring.
The majority of Texada’s revenues
are recurring, derived from SaaS subscription fees and monthly maintenance
service. For the last three consecutive quarters, revenues have been on the
rise. In the most recent quarter of Q1 2021, Noble Iron reported revenues of
about C$1.6 million. Over 80% of these revenues were classified as recurring by
the Company. At the Q1 revenue base, Noble Iron operated at a near breakeven
level for cash flow from operations, EBITDA and net income. This provides some
visibility towards future profitability as revenues continue to grow.
We recently spoke with the CEO and major
shareholder of Noble Iron. The CEO confirmed to us that the business activity
for Texada’s software offerings is robust and there are several larger customer
contracts they anticipate to win this year. With that, the Company’s CEO said
they are also evaluating merger and acquisition (M&A) opportunities. Noble Iron
has over C$5 million in cash on its balance sheet and no bank debt.
Albeit on low trading volumes, Noble
Iron's stock price has more than doubled in value since earlier this year. We
note the shares last traded at Investorfile’s accumulation target price of
C$0.60. But, given recent financial results and our discussion with the
Company’s CEO, we still encourage small cap investors with a longer investment
horizon to acquire shares of Noble Iron near its current trading levels to
maximize upside potential.
At a C$0.60
share price, Noble Irons’ stock is valued at only about three times its current
Annual Recurring Revenues (ARR) run-rate. That said, the Company’s ARR
continues to trend higher. If you factor in new customers wins and the
potential for M&A activity, the shares are still not expensive for a SaaS
While Investorfile acknowledges Noble Iron is a very
under-promoted small public company, its financial results should not go
Noble Iron Inc. has approximately 27.3
million shares outstanding.
Company website: www.nobleiron.com
Author Ownership Disclosure: TSXV: NIR – Yes
share price accumulation target of C$0.60 for Noble Iron Inc. was initially
reached at the market close on February 8, 2021.
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
Investorfile.com is not engaged in an investor relations agreement with Noble Iron Inc. nor has it received any
compensation from Noble Iron Inc. for the
preparation or distribution of this article.
The author of this article has acquired and may trade shares of Noble Iron Inc. through open market
transactions and for investment purposes only.