Closing in on the title-services market; upside potential over the long term

Canadian and U.S. morning comments

June 22, 2017

We have initiated coverage on the common shares of Real Matters Inc. with a Sector Perform rating and a one-year target of C$14.00 per share. Our valuation of Real Matters is based on a discounted cash flow (DCF) analysis that implies an EV to net revenue multiple of 6.0x on our F2019 estimates (for the year ending September 30, 2019).

Premium valuation reflects a large market opportunity and significant growth. In our view, Real Matters is a unique stock in the large cap Canadian technology universe that is pricing in substantial growth beyond our forecast horizon, based on its growing share of the $16 billion U.S. appraisal and title-services markets. We consider Real Matters to be a high-quality company in our coverage universe given the impressive market presence it has developed over the past 10 years, having secured relationships with a number of leading financial institutions in both Canada and the United States.