Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Datatec. We currently have 14 research reports from 2 professional analysts.
The Group has reported H1 18 EBITDA of US$7.7m, down from the US$24.4m reported in the same period last year.
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This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
Companies: 7DIG ALT AMO ARTA BOTB BLTG CTP CITY D4T4 DTC DOTD ELCO ESG FDEV GBG IDEA IDOX IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SEE SIM SPE SRT STR TRMR TAX TEP TPOP TRAK UNG VIP ZOO CYAN ONEV SSY ABAL
The Group's subsidiary Westcon-Comstor is struggling in EMEA and North America.
Bioventix* (BVXP): Strong trading update (CORP) | Central Asia Metals (CAML): Intended transaction and suspension of trading (U/R) | InnovaDerma* (IDP): Solid operational update (CORP) | Tax Systems* (TAX): Evolution continues (CORP) | Datatec* (DTC): Completion of Westcon-Comstor disposal (CORP) | SimiGon* (SIM): Encouraging contract from The FAA (CORP)
Companies: BVXP CAML IDP TAX DTC SIM
Gem Diamonds (GEMD): Large diamond recovered at Letšeng mine (BUY) | Datatec* (DTC): Year-end trading update and possible sale of Westcon-Comstor (CORP)
Companies: Gem Diamonds Datatec
Enterprise-focused niche applications of tech illustrate how, while trends appear to be fluctuating away from the current poster children of fintech and the Internet of Things, in fact these developments are refining appropriate application of existing technologies.
Companies: 7DIG AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD ELCO ESG FDSA FDEV GBG IDEA IDOX IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TAX TEP TPOP TRAK UNG VIP ZOO ONEV SSY ABAL
ICT evolution is driven by technological development as advances are made which both meet and shape customer requirements. Our 2011 note No such thing as a telco described the modern reality in that former ‘telcos’ now deliver varying elements of a range of managed services. We built on this theme last year, exploring in further detail their evolutionary paths, operating fundamentals, and cashflow yield similarities. In the consumer environment, demand for bundles of technology is complemented by demand for content. Across the pond, the mooted combination of AT&T and Time Warner typifies the bundled need of ‘pipe’ and content, since unbundled alternatives such as FaceTime and WhatsApp can be easier and clearer to chat over, and Amazon and Netflix are easier to watch anywhere. In the UK, BT’s defensive actions cover delivery, content and capabilities, acquiring EE yet also buying football rights. While TV was long ago added to triple play to become quad play, voice is now merely an app, and fixed and mobile seen as just dumb pipes: it's the content that will influence consumer choices. Growth of TV and film as well as music and gaming over IP leads to UK small cap opportunities. In context of the drive to maximise value from pipes and access by offering content and data, we look at some amongst the potential tech small cap beneficiaries: Amino*, Keyword Studios, ZOO Digital*, 7digital*, KCOM* and CityFibre*.
Companies: 7DIG AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD EGS ELCO ESG FDSA FDEV GBG IDEA IDOX IMG IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TAX TEP TPOP TRAK UNG VIP WAND ZOO ARC ONEV SSY ABAL
Datatec’s interims to August repeated the underlying detail revealed at the September trading update: the board looks to a sequentially and comparably stronger 2H17 and FY17, with revenue of $3.04bn showing a 7.6% decline vs 1H16 but at a gross margin of 13.8% (1H16: 13.1%), highlighting the challenges faced in a macro environment dominated by the effects of the strong dollar. The 1H dividend has reverted to match the unchanged existing dividend policy (exceeded since 2012) from 8 USc to 4.2 USc, to maintain a fixed three-times cover relative to underlying earnings. While FX has challenged the business momentum, it has benefited the sterling translation effect and therefore we retain our 400p target. Evidence of gentle LatAm recovery to the benefit of revenue, an improving product mix to the benefit of gross margin, and efficiency gains in opex due to the ERP, BPO and other initiatives, all lead to optimism for recovery for Datatec into 2H17 and FY18.
Mobile money has been slow to deliver but investors need to stay engaged as there are plenty of reasons as there are plenty of reasons for success. Mobile penetration and network coverage are growing inexorably and where communication leads, transactions follow, as e-commerce has proven. Banking and payments lead the way but it will embrace other financial services too, from insurance to cross-border remittance. Slowly but surely, mobile money is coming of age.
Companies: 7DIG AN AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD EGS ELCO ESG FDSA FDEV GBG IDEA IDOX IMG IGP IOM KBT KCOM KWS LRM MAI NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TAX TEP TPOP TRAK UNG VIP WAND ZOO ARC ONEV SSY ABAL
After a challenging year driven negatively by macro-economic circumstances beyond company control, the Datatec board has reiterated confidence with a maintained dividend. The one-off FX cost in Angola will not recur and we can see no further similar situations; the Westcon restructuring and BPO transformations are mostly complete, which will enhance margins and efficiencies; and challenged emerging markets businesses have been right-sized accordingly. Logicalis enjoyed strong second-half margins and strength in the US and Europe. With growth initiatives and margin focus, it is now a question of proving the execution and restoring confidence. Target 400p reiterated.
This quarter's topic: Feasting on Red Tape. 2016 harbours every chance of being a stultifying year, given the imminent local and London mayoral elections, the looming hurdle of Brexit, the summer doldrums, the bizarre potential outcome of the US presidential election and then the home strait to Christmas. Excuses for inactivity abound with regard to spending IT capex budgets.
Companies: 7DIG AN AMO ARTA BVC CTP CITY DTC DOTD EGS ELCO FDSA FDEV GBG IDEA IDOX IGP IOM D4T4 KBT KCOM KWS MAI NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TEP TPOP TRAK UNG WAND ZOO ARC ONEV SSY
This quarter’s topic: Automotive Technology. With the Mobile World Congress approaching at the end of this month and likely to feature so many automotive applications to the extent it should perhaps be renamed the Mobile World of Cars, we examine the growing impact of technology in the automotive industry, from telematics to connected cars and autonomous vehicles.
Companies: 7DIG AN AMO ARTA BVC CITY CNS DTC DOTD EGS ELCO FDSA FDEV GBG IDEA IDOX IGP IOM D4T4 KBT KCOM KWS MAI NASA NET PHD QTX QXT RCN 932 SEE SIM SPE TEP TPOP TRAK UNG WAND ZOO ARC CTP SSY
SCISYS*: H2 confirms recovery (CORP) | Aukett Swanke*: Choosing the moment (CORP) | Independent Oil & Gas*: Skipper licence extension and share issue (CORP) | Datatec*: Ten-month update (CORP) | Penna Consulting: Analyst interview (BUY)
Companies: AUK IOG DTC PNA SSY
Datatec interims to August were well flagged by trading updates in July and September, having indicated FX and margin pressure. Group revenue growth of 10.1% included organic revenue growth of 8.5%, however EBITDA (Datatec measure, post SBP) declined 11% due to the fall-out from US dollar currency exposure, weakness in the high-margin Latin American region, and growth in lower-margin US product sales. Remedies are in hand to correct or minimise further impact and lift the trajectory back up going into FY17, however there are inevitable downgrades (-15%) to FY16 (February year-end) EBITDA. Target 400p (450p).
Research Tree provides access to ongoing research coverage, media content and regulatory news on Datatec. We currently have 14 research reports from 2 professional analysts.
|07Dec17 07:00||RNS||Cancellation of AIM listing|
|04Dec17 13:00||RNS||Holding(s) in Company|
|01Dec17 12:00||RNS||Notification of major interest in shares|
|30Nov17 14:00||RNS||Dealing in securities by a director|
|30Nov17 13:00||RNS||Notification of major interest in shares|
|29Nov17 07:00||RNS||Special cash dividend|
|13Nov17 07:00||RNS||Half-year Report|
Bill McDermott stood down on Friday after a decade building up SAP as the world's leading enterprise software company, handing the task of completing its transition to cloud computing to new co-CEOs Jennifer Morgan and Christian Klein. SAP announced the management overhaul, with immediate effect, after rushing out third-quarter results that showed it gaining traction in its drive to offer a more streamlined range of services and boost profitability. The company’s stock has climbed 21% this year. It’s up 75% in the past five years, topping rival Oracle, which is up 46%, and the S&P 500′s 54% gain.
Companies: EVRH TRAK CPX CALL ECK IMMO LOOP NET SEE TCM TRCS QTX VRE
dotdigital’s final results contain no surprises, having been largely flagged at the trading update in July. The group continues to deliver high quality growth, with good progress being made across each of its strategic pillars. Group organic revenue growth from continuing operations of 15% was driven by growth in all geographic regions, with new product functionality continuing to drive increased revenue from existing customers. Further strong execution is expected and we are making no major changes to our forecasts. With net cash balances forecast to rise quickly from here, we believe the group has strong opportunities for both organic and acquisitive growth, offering multiple avenues for future value creation.
Companies: Dotdigital Group
Eckoh’s Capital Markets Day yesterday highlighted the progress which has been made on the Customer Engagement side of the business. With all products now successfully integrated into the Eckoh Experience Portal, the group is uniquely placed to enable digital transformations within their customers. We were shown several live case studies where the group has been able to deliver both an improved experience for end users and significant cost savings for clients by implementing a connected cross-channel customer experience. Last month’s AGM Statement and Trading Statement confirmed strong underlying momentum in both divisions and we see plenty of scope for growth within Customer Engagement, which will augment the large untapped opportunity in US Secure Payments.
IQE has acquired the third-party shareholdings in its CSDC joint venture in Singapore for a nominal fee. This gives it control of the operation, which is currently loss making, enabling it to restructure the business and focus it on emerging sales opportunities in Asia for molecular beam epitaxy (MBE)-based products. Short term, the deal has a negative impact on earnings. We reduce our FY19 and FY20 EPS estimates by 8% and 5%, respectively.
Final results to June indicate performance in line with expectations, with EBITDA of £14.7m (£15.0mE) delivered from revenue of £42.5m (£42.5mE) leading to adj. dil. EPS of 3.9p (3.4pE, outperformance due to a lower tax charge) and free cash flow of £6.2m (£6.3mE). In a post-GDPR, pre-Brexit world, DOTD has simply got on with the job, driving increased ARPU of £966 (FY18: £845) from more customers taking more products in more territories, with a greater number of channels and partners. This has led to 15% organic growth from continuing operations with 86% recurring revenue (90% contracted) – with the strong visibility supported by a hearty balance sheet including £19.3m net cash, giving DOTD strategic opportunities to add to its existing operational strength. There are few companies we can point to which consistently deliver 15% organic growth, PBT margins over 25%, and reliable cash conversion (>80% op cash/EBITDA). Target 135p reiterated.
Companies: Dotdigital Group
We recently met with the divisional management of one of Instem’s businesses – Informatics. Despite its relatively small scale, the unit has an interesting platform, is experiencing significant growth, and some of its services offer both material cost savings and process improvements to major players in the pharma market. It therefore offers Instem a greater degree of value than might be apparent simply by looking at its current scale – today’s RNS highlights informatics order intake up c60% YoY to £0.84m during the first nine months of 2019. This note summarises the mediumterm potential of the unit, both in its own right, and to Instem as a whole.
CentralNic Group has a solid set of interim results for the first six months of FY2019E, it was a busy period with the group completing 3 acquisitions immediately post the period end, issuing a €50m listed bond instrument and making solid progress in delivering on its stated accelerated strategy. Revenue for the first six months is up 225% yoy, with c.6% organic growth, in line with long term trends for the group. These results are the first time the group have reported in US Dollars. The group’s main functional currency is USD and we believe this is a sensible decision and should remove some currency related risk from the forecasts. CentralNic has made significant progress in delivering on its stated strategy of supplementing organic growth with quality acquisitions, focusing on recurring revenue businesses, in attractive regions. On our new USD based forecasts, the group trades on a 2019E EV/EBITDA of 8.7x (falling to 7.0x in 2020E) and a P/E of 11.0x.
Companies: Centralnic Group
SDL held a well attended Analyst and Investor day yesterday at its Maidenhead HQ. The Group showcased its Helix, Insight and Tridum DX platforms, as well as offering a demonstration of the new Language Cloud portal which opens up the prospect of a fully automated machine translation portal in the future. We continue to see SDL as well placed within the premium content space (market growth estimated: 10% -15% pa), while also delivering growth within the user-generated content market (estimated growth: 15% – 25% pa). We make no changes to forecasts at this time. SDL trade on an FY’20E EV/EBITDA multiple of 9.9x, an attractive multiple given healthy growth, strong technology platforms and expected benefits from DLS integration.
Although Nanoco’s major US client will not progress to volume production in the foreseeable future, commissioning work continues on the new production capacity, which is scheduled to complete by December. Once that is completed, the facility will be able to produce high-quality infra-red nanomaterials for use in a number of electronics applications. It could therefore be used to service future demand from the US customer or potential new customers in the electronics or display industries with which Nanoco is in the early stages of discussion. The current market capitalisation appears to assign little value to these assets at a time when there appears to be renewed market interest in quantum dots.
Companies: Nanoco Group
In January, we provided a list of 11 stocks for 2019 that we believed would perform strongly with attractive catalysts that could lead to material outperformance. In this Quarterly Research Outlook, we revisit these views, analysing what has happened and how the remaining six months of the year could play out.
Companies: AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE CYAN DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR HYR IBPO IOG INDI JHD JOG KAPE KEYS KCT KGH LAM LIT LOK MACF MANO PCA PANR PXC PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG SOM TWD TRAK TSG TRI VNET VTC ZOO ZTF
Microsoft unveiled the new Surface Duo, which runs on Android, at its annual hardware event on Wednesday. The folding phone features two side-by-side 5.6-inch displays that are connected by a 360-degree hinge. Microsoft said it partnered with Google to “bring the best of Android” to the device, while incorporating elements of Windows 10X, a new operating system meant for hybrid devices. It can also run two different apps at the same time. Specifically, the Surface Neo will rely on a new "Expression" of its Windows 10 operating system called Windows 10X.
Companies: KAPE EYE IMO
Brady has received a recommended all-cash offer at 10p per share (a 50.8% premium to the closing price), valuing the issued share capital at £8.3m, from Hanover Active Equity Fund II, a private equity (PE) investor focused on SMEs in the UK and Nordic markets. The cash offer has been declared final, will be declared unconditional as to acceptances based on 50% of the share capital and may only be increased if there is a counter-offer. Before the bid, Brady had been looking to secure additional funding for a turnaround strategy, and although negotiations have advanced, the company has not yet secured unconditional funding.
A stronger than expected H2 means FY Mar 2019 earnings beat forecasts already upgraded with the post-YE trading update in April. We expect robust demand for data solutions to continue and we reiterate FY 2020 growth expectations. Note that IFRS15 adoption brought £1.7m revenue and £1.0m profit from FY 2018 (restated) into FY 2019, enhancing the growth rate. The 57% EPS growth was further skewed by a very low tax-rate in FY 2019. Thus revenue and earnings appear to fluctuate sharply. Underlying that, however, D4T4 is steadily growing revenue and maintaining margins, while simultaneously improving quality and reliability of earnings through term licences, PaaS and recurring revenue while also investing in US expansion. Overall, this is another year of excellent performance and we raise our TP to 310p in line with the sector.
Companies: D4T4 Solutions
Beeks Financial Cloud has announced full year results for period to 30 June 2019, with revenue up 32% to £7.35m and annualised monthly committed recurring revenue (ACMRR) also up 32% to £9.1m. Three Tier 1 financial services clients were signed during the year including a major insurance company, a global bank and a global investment management organisation. The number of institutional customers has increased to 220 from 192 in 2018, with the commencing entry level monthly average spend up 175% (to £2,200). Now beginning to establish itself within the large tier financial services market, we expect the number and scale of these relationships to be potentially transforming for Beeks. With our forecasts based on established growth trends, such potential could provide further upside to our forecasts and with the shares currently trading at 11.0x 2020E EV/EBITDA, 21x PE, PEG ratio of 0.54 (2020/21) and a prospective 0.9% yield, we remain buyers.
Companies: Beeks Financial Cloud
Yourgene provided a positive trading update for FY 2019 (ending March 2019), with revenues coming in 5% above our forecasts, driven by growth in all markets. International markets now represent c.66% of group revenues and grew by 51%, illustrating the strong momentum in the business and re-invigorated commercial emphasis brought about by the new CEO and commercial director since mid-2018. Year-end cash of £1.25m demonstrated the move towards profitability, which we now expect in H2 FY 2020, with EBITDA breakeven estimated to have been reached in late FY 2019. We are upgrading forecasts to reflect this momentum together with early signs of traction in markets such as France (reimbursement changes) and India. We now forecast £1.2m adjusted EBITDA in FY 2020 and upgrade our target price by 5% to 19p, with further upside expected by the potential entry into markets such China and North America.
Companies: Yourgene Health