Kinatico Limited: A Strategic Transformation to a SaaS-Focused Business

As leading ASX-listed companies such as Xero, WiseTech Global, and TechnologyOne demonstrate, the Software as a Service (SaaS) business model offers a range of compelling advantages for customers, providers, and investors. Among these advantages is the recurring revenue model, which leverages monthly or annual subscriptions to deliver a predictable and stable income stream, enhancing revenue visibility and the ease of forecasting compared to traditional one-off software sales.

Small-Cap Kinatico: A Strategic Transformation

New research from Bell Potter highlights small-cap Kinatico ((KYP)) – market capitalisation below $100m – as a company undergoing a strategic transformation towards a SaaS-focus, delivering real-time workforce compliance management via a suite of integrated, cloud-based solutions. This strategic shift is expected to increase recurring revenue, improve margins, and potentially lead to a re-rating of the company’s valuation multiple.

A Ready-Made Pipeline: CVCheck

Kinatico also has a long-standing screening and verification revenue stream, under the brand CVCheck. CVCheck provides employment screening and verification services to over 10,000 repeat corporate clients, including BHP Group ((BHP)), Inghams Group ((ING)), and IKEA. Research as a Service (RaaS) highlights CVCheck as a ready-made pipeline and sales acquisition client base for the new SaaS product.

A New Business Aims to Transform People Management Workflow

The new business aims to transform people management workflow with an app for customers which synchronises disparate workforce compliance, procedural, and ad-hoc data sources into a real-time administration dashboard. The company has identified workforce compliance and procedural management as complex, time-consuming tasks, often leaving businesses grappling with scattered systems and incomplete data.

Productivity Gains and Reduced Go-to-Market Risk

Shaw and Partners highlights the new Kinatico Compliance platform delivers substantial productivity gains, with some processes reportedly reduced to under 10 hours per week from around 35 hours. The broker also notes reduced go-to-market risk due to the controlled deployment of a platform already validated through close alignment with end users.

International Expansion and Market Opportunity

Taylor Collison points to international expansion as an additional source for further upside over the medium term. The new SaaS offering provides Kinatico with a significant opportunity to expand into the small to medium enterprise (SME) segment. According to Bell Potter, the market in which CVCheck currently operates has become highly competitive, with its core service increasingly commoditised. The introduction of a differentiated SaaS product allows Kinatico to pivot into a distinct and less saturated market.

A Healthy Financial Position and Low Debt

The overall business is already profitable and cash flow positive, with around $10m in cash on the balance sheet and no debt. A healthy financial position means the company has been able to internally fund development of its new SaaS solution. Bell Potter anticipates the company will be able to continue to do so.

Kinatico Compliance: A Staggered Rollout Strategy

The staggered rollout of Kinatico Compliance to large, cooperative clients is a prudent strategy, opines Taylor Collison, enabling management to address any issues ahead of broader commercialisation. The platform has been shaped through two years of direct customer engagement and self-funded development.

A Competitively Priced Alternative

Taylor Collison believes Kinatico offers a compelling and competitively priced alternative to peers such as Employment Hero ($29) and SafetyCulture ($24). The tiered pricing model starts with a free entry point for organisations with fewer than five employees, followed by a base rate of $15 per user per month.

A Strong Leadership Team

Providing additional confidence, CEO Michael Ivanchenko has led Kinatico for nearly four years. Bell Potter highlights Ivanchenko’s role in developing and executing the new SaaS strategy. The recent appointment of Chief Marketing Officer Chantal Walker further strengthens the leadership team, in the broker’s view.

Outlook and Valuation

There are two daily monitored brokers in the FNArena database researching Kinatico now. Bell Potter has started coverage with a Buy rating and 12-month target price of 30c. Buy-rated Shaw and Partners has a 27c target. Research as a Service has a discounted cash flow (DCF) valuation of 38c, expecting the gap between the current share price and its valuation to close.

While Kinatico shares are currently trading -2c weaker at 22c, this is significantly higher than the 14c at the start of the calendar year. The author owns shares in Kinatico.

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Broker	Rating	Target Price
Bell Potter	Buy	30c
Shaw and Partners	Buy	27c
Research as a Service	–	38c

“Kinatico Limited is a high growth stock with a strong management team and a unique value proposition. The company’s SaaS business is poised for significant growth and expansion into new markets.” – Taylor Collison