Canaccord Genuity reiterates 'buy' rating on Kainos

Canaccord Genuity said Kainos' announcement that it had received "Phase 1 Prime Partner" status from system software company Workday in the US, which it has been holding in Canada and most major European markets for some time.

The Canadian bank stated that in practice this meant that Kainos can now bid for and deliver initial implementations/rollouts for Workday software in the US market, whereas previously it was only allowed to bid for "Phase X" projects - such as upgrades or extensions after initial deployment.

Canaccord also noted that unlike the services ecosystem for most other large enterprise software vendors, the "club" of integrators was tightly managed and controlled by Workday limiting new entrants and hence competition - making this "a highly attractive market" to be a part of.

The analysts believe that gaining "Phase 1" status will likely act as a mid-to-long-term growth catalyst for Kainos' "fast-growing" US business.

"With Kainos now able to bid for Phase 1 deployments, this should be accretive to the growth opportunity," said Canaccord.

"Adding the handful of accredited Phase 1 partners, and we would size the US Workday Services TAM at around $1.5bn. As per our below 'back of the envelope' math, we estimate that every 1% US TAM capture could hence add ~£13m/3% to Kainos' sales and operating profits."

Reporting by Iain Gilbert at Sharecast.com