Intelligent Systems Corporation

INS Details

Intelligent Systems Corporation (NYSE: INS) is a software company that provides credit technology solutions and processing services to the financial technology and services market. The company, through its subsidiary CoreCard Software, Inc., has designed and developed a comprehensive suite of software solutions that are used by its clients to manage credit and debit cards, prepaid cards, private label cards, fleet cards, loyalty programs, and accounts receivable and small loan transactions. INS operates in the United States, Australia, Canada, China, the UAE, France, Italy, Mexico, New Zealand, Singapore, South Africa, and the United Kingdom. As of May 26, 2021, its market capitalization stood at USD 315.77 million.

International Expansion: On April 19, 2021, CoreCard announced a partnership with Al Ansari Exchange, the UAE-based foreign exchange and worldwide money transfer company. Under the partnership, CoreCard will provide prepaid card processing services for the Al Ansari Exchange Visa Platinum Multi-Currency Travel Card. The card can be used worldwide and can be loaded with 17 different currencies. This came almost concurrently with opening a subsidiary of CoreCard in Dubai, UAE, which helped the company gain access to new markets including the Middle East, Europe, Asia Pacific, and Africa.

Q1FY21 Results: The company reported an increase of 12.91% in total revenue to USD 8.91 million in Q1FY21 (ending March 31, 2021) compared to USD 7.89 million in Q1FY20. Revenue from Professional Services accounted for 64.49% of total revenue in Q1FY21. The company reported a net income of USD 1.04 million in Q1FY21, lower than USD 1.05 million in Q1FY20, primarily due to the costs of opening a new office in Dubai and developing CoreCard’s new processing platform.

INS Solutions Portfolio (Source: Investor Presentation, April 14, 2021)

Key Risks: The company’s largest customer represented 71% of its total revenue for Q1FY21. As a result, the loss of this customer and related future revenues has the potential to severely affect the company’s financial standing. Moreover, increasing and changing government regulations in the US and worldwide related to issues such as data privacy, financial and credit transactions could affect INS’s costs and customer relationships.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

INS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: INS has declined by 18.24% in the past three months and is currently leaning towards the lower band of the 52-week range of USD 29.80 to USD 54.58. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 41.33. On the technical chart, the next support level is USD 31.74. Considering the slight correction in the stock price in the last three months, strong balance sheet, no long-term debt, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 35.36, down by 0.53% as of May 26, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.