RaaS Research Group is initiating coverage of education technology group ReadCloud (ASX:RCL) with a base case valuation of $0.35/share, representing 257% potential upside to the current share price. ReadCloud is a diversified business with three different verticals entrenched in the education sector with the tailwind of accelerating digitisation. The business has reached an inflection point under new management having integrated and consolidated previous acquisitions, reduced costs, focussed on profitability and cash generation, and positioned for growth and operating leverage. The company has a proven platform and product suite with growth domestically and internationally. It is now a cash generative and operating profitable business with a debt-free balance sheet providing optionality for growth. We initiate coverage with a DCF-based valuation of $0.35/share, representing capital upside potential of ~257% on the current share price. Return on equity and relative peer analysis methodologies are also considered in this report and support our fundamental value thesis.
