Four plays for growth
Summary – In this report we outline the investment case for four companies that we believe have transformative growth potential: Bigblu Broadband, Audioboom, ULS and Beeks. We also include the current sector valuation, our recent research, and a profile of all of the companies covered by the 4-strong Tech Research team at finnCap.
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29 Nov 19
Strong H1 growth in a challenging environment
Elecosoft has reported a solid set of H1 2019 results in a challenging market environment. In light of the H1 results, we have reduced our FY 2019 forecasts but maintain our FY 2020 EBIT and EPS expectations. In H1 2019, revenue grew +20% to £12.7m (+22% at constant currencies), adj. EBIT grew +17% to £2.2m, and FCF was flat at £2.1m. Operationally, ELCO has made good progress in H1 with the latest release of core solution Powerproject XV; a UK government listing on the G-Cloud 11 framework; and evidence of increased cross-selling including by the recently acquired Active Online. We continue to expect that ELCO can benefit from the growing adoption of Building Information Modelling (BIM) within the construction industry, as ELCO is already established with excellent brands and has the opportunity to increase the cross-selling of its products. In light of the limited changes to our FY 2020 EPS forecast, we maintain our TP, and look for enhanced delivery by ELCO in H2. At 76p and on FY 2020 estimates, ELCO trades at a PE of 16x and 1% dividend yield.
25 Sep 19
1 st class software, customers & cashflows
In the 1999 sci-fi hit ‘The Matrix’, the movie portrays a world when humans live in a computer generated universe. Two decades on, a similar virtual reality is being created across the infrastructure, construction & real estate industries – facilitated by innovative new BuildTech software.
24 Sep 19
Morning Note – 24 September 2019
DX (DX): Corp Well on the road to recovery | Elecosoft (ELCO): Corp Strong H1 growth in a challenging environment | Europa Oil & Gas (EOG): Corp Irish exploration to be phased out? | Flowtech Fluidpower (FLO): Corp Interim results, weaker H2 trading expected | InnovaDerma (IDP): Corp FY 2019 finals – a solid base for future growth
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24 Sep 19
The perfect GARP stock
GARP investing is all about buying quality secular growth companies at reasonable prices. Hence investors should be able to own them for long periods, and (hopefully) enjoy years of healthy returns thanks to strong EPS and multiple expansion. Enter BuildTech software developer Elecosoft, who said this morning that trading is “in line expectations” - with H1 revenues jumping 22% in constant currency terms (20% reported) to £12.7m (ED est), EBIT margins similar to H1’18 (ie 16.6%) and net debt closing June at a modest £0.6m (or 0.1x EBITDA) vs £2.1m in Dec’18.
07 Aug 19
Morning Note – 7 August 2019
Elecosoft (ELCO): Corp First half meets expectation | Europa Oil & Gas (EOG): Corp Frontier Exploration Licence award | Evgen Pharma (EVG): Corp Patent update – European grant |Kazera Global (KZG): Corp Update for NTI tantalite mine | Shield Therapeutics (STX): Corp Interim results – looking to the US and full H2H data
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07 Aug 19
Promising start to the year
Building technology businesses is a bit like designing Formula 1 racing cars. Deciding which parts to create in-house, which to ‘buy & build’, and then importantly fitting them all together to accelerate top line growth and generate synergies. Well, after the Shire Systems and Active Online acquisitions last year, we believe Elecosoft, a specialist developer of BuildTech software, is on track to achieve all three. Indeed, in this morning’s trading update the company said it had made an “encouraging” start to 2019, with Q1 revenues up 20% (22% constant currency).
09 May 19
Morning Note – 9 May 2019
Byotrol (BYOT): Corp FY trading update | Chariot Oil & Gas (CHAR): Corp Anchois satellites CPR | Elecosoft (ELCO): Corp A good first quarter in line with expectations | Robinson (RBN): Corp Positive AGM trading statement | Velocity Composites (VEL): Corp Encouraging trading update, resumption of forecasts
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09 May 19
Small Cap Feast
Induction Healthcare Group plc—a healthcare technology company focused on streamlining the delivery of care by Healthcare Professionals looking to join AIM. Expected raise of £14.58m at 115p, market cap of £34.07m. Expected 22 May 2019. SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
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09 May 19
New products deliver FY 2018 earnings beat
The multi-national construction software and digital visualisation developer and supplier has defied Brexit fears to deliver another strong year, showing both organic and acquired growth. FX fluctuation meant its overseas sales were slightly below our forecast, but stronger margins from operational gearing led to a comfortable beat on the earnings front. The cash conversion remains excellent and the solid 0.7p dividend is in line with our forecast. The H2 acquisitions left £2.1m net debt at the YE; however, given the reliable FCF we expect that to be paid up quickly with no dividend impact. Operationally, the additions of ShireSystems and ActiveOnline extend the portfolio along a building’s lifecycle from planning and construction into facilities management and further into interior design. ELCO offers a ‘BIM’ software suite to bring together the many different stakeholders in a construction. BIM processes are being widely adopted in the UK (mandatory for government construction) and globally. ELCO is well positioned to ride this wave of adoption, benefiting from cross selling into regional markets where it is already established with excellent brands. We take the opportunity to reiterate our FY 2019 and introduce FY 2020 forecasts; we also lift our TP to 93p on the back of these strong results and expect a re-rating.
20 Mar 19
2019 sales set to jump 19% after record year
Since the Federal Reserve’s volte face on interest rates in December, most large cap equity indices have bounced back to near all-time peaks. The sharp rebound though hasn’t yet fully filtered through into AIM, where many tech stocks remain little changed from their yearend lows. Nonetheless, we believe this situation should rebalance in 2019 as risk appetite improves, especially for quality names that continue to deliver impressive returns.
19 Mar 19
Disrupting the $10 trillion construction sector
In light of the fears over Brexit, US/China trade tensions and slowing Eurozone growth, it’s not surprising that even the highest quality stocks have been ‘thrown out with the bathwater’ during the recent correction. However for risk-tolerant investors, volatility creates opportunity, particularly for those top notch businesses enjoying wide ‘economic moats’, long term tailwinds and priced at attractive levels.
25 Jan 19
Small Cap Feast
Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected late January 2019. Chaarat Gold Holdings—RTO, the Company intends to acquire Kapan Mining and Processing CJSC, which owns the Shahumyan medium-sized polymetallic mine in Kapan in the Republic of Armenia. No raise, market cap of £110.1m, due early Feb
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25 Jan 19
Morning Note – 25 January 2019
Destiny Pharma (DEST): Corp UK-China AMR £1.6m grant award | Elecosoft (ELCO): Corp FY 2018 results comfortably in line | Europa Oil & Gas (EOG): Corp And the fight goes on | Mporium Group (MPM): Corp Strategic collaboration | SCISYS (SSY): Corp FY 2018 meets guidance with strong order book at YE
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25 Jan 19
Building a virtual world
The group has undertaken a placing to raise £2.25m in order to part-fund the proposed acquisition of Active Online GmbH for a maximum consideration of €3.45m. This purchase follows the recent acquisition of Shire Systems earlier in H2 2018, and continues a strategy of steady expansion of the software portfolio to cover a broad range of the needs of Architectural, Engineering and Construction (AEC) professionals notably meeting the requirements for the Building Information Modelling (BIM) process. This acquisition will further enhance the cross-selling opportunities, increase the scale of the business and provide synergies to be exploited. Traditionally, the company has used cheap debt and its own cash resources to fund expansion, but is using some equity investment to widen the shareholder base. We expect the acquisition of Active Online to accelerate growth in the longer term and be earnings neutral this year and c.5% earnings enhancing in FY 2019.
06 Nov 18
€3.45m acqn of VR/AR visualisation expert
Enter Active Online GmbH based in Wesel, NW Germany and employing 29 staff. Its “cutting-edge” software allows consumers & homeowners to do exactly this. Swapping out the furniture, curtains & flooring, alongside changing the décor, wall colours, light fittings, fabrics & windows. All at the touch of a button in rich HD/3D graphics. Providing a fully immersive 360-degree view, Virtual & Augmented Reality (see next page), cloud data management and advanced apps to enable an almost limitless range of homeware products to be imported via standard QR codes. The technology is deployed by c.700 organisations (see later) in order to enhance their sales processes and end-user engagement.
06 Nov 18
Morning Note – 6 November 2018
Castleton Technology (CTP): Corp Confidence and delivery | Elecosoft (ELCO): Corp Building a virtual world | Kazera Global (KZG): Corp Investee company operational update | Proteome Sciences (PRM): Corp Q3 trading update and preferred provider status | ZOO Digital (ZOO): Corp Momentum continues
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06 Nov 18
Building an impressive portfolio of products
As trailed in the August trading update, this is another strong half of growth from the global construction industry software supplier. This performance leaves it well on track to deliver our FY expectations. Post period-end, H2 will be augmented by the acquisition of leading UK facilities management software developer, Shire Systems, in July, and there is a change of FD with deputy FD, Ben Moralee, replacing Simon Morgan, who leaves to pursue other interests. We retain our current FY forecasts but emphasise the security of revenue (55% recurring) with both growth and cashflow being delivered and acceleration ahead.
12 Sep 18
Shire acquisition “is amazing”
Every so often even traditional, old-fashioned industries are transformed by new disruptive technology. One of the latest being the $10 trillion Architecture, Engineering & Construction (AEC) market, where cutting edge BuildTech software is digitising the entire property/infrastructure life cycle (say 75 years). Covering initial design, build and commissioning, right through to maintenance, repair, upgrade and final demolition. Strangely though, this seems to have been somewhat overlooked by UK investors, despite the sector expanding at a healthy 11% clip and being worth c. $6bn pa (source: Nemetschek).
12 Sep 18
Small Cap Breakfast
Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due late Sep. EBITDA Profitable. Offer TBA Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months. Path Investments (PATH) -RTO of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Seeking £10m. Offer TBA. Due Mid September Kropz PLC-Intention to float by the emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa and exploration assets in West Africa
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12 Sep 18
How to profit from the surge in BuildTech
How can an outside investor gauge the quality of a company’s software? Speak to experts, test the product, ask clients and/or review industry awards/journals. Elecosoft scores highly on all of these counts - yet to us what really stands out is its customer base.
02 Aug 18
Acquisition adds Facilities Management solutions
Elecosoft’s acquisition of Shire Systems, a leading UK CMMS (Computerized Maintenance Management Systems) provider, expands the portfolio further down the lifecycle of buildings; from its strong established position in design project management and construction, into the ongoing Facilities Management industry. This is a very natural progression; Elecosoft solutions already capture huge volumes of dynamic building data in the early design and development phases, effectively creating a handbook for buildings. It is logical to port that data into a FM solution to preserve the knowledge for the enterprises managing those structures during their future years of use. The price is reasonable (7.2x earnings) and funded by relatively cheap debt, so the deal is earnings enhancing. We raise our FY 2019 earnings forecasts by 10% and our target price to 88p.
05 Jul 18
A ‘match made in heaven’
M&A is a bit like ‘panning for gold’. Most prospectors lose money, but the successful ones do the homework, know where to look and crucially understand their markets inside out. Similarly, we think Elecosoft - following its ‘transformational’ £2.4m acquisition of BIM (Building Information Modelling) SaaS provider, ICON back in October 2016 - has done it again.
05 Jul 18
Small Cap Breakfast
Anexo -specialist integrated credit hire and legal services group. Offer TBA. Due 19 June. i-nexus—develops and provides strategy execution software to assist global enterprises in effective execution of their strategic plans and initiatives looking to jon AIM. Offer TBC, expected 19 June Yellow Cake will use its expertise to generate value through the ownership of physical U3O8 (Uranium) together with a range of activities and opportunities connected with owning physical U3O8. Acquiring supply contract for up to $170m. Offer TBA. Tekmar— technology provider of protection systems for subsea cable, umbilical and flexible pipes and offshore engineering services—Offshore wind farms and Oil & Gas. Revenue of £21.9m and Adjusted EBITDA of £4.9m Offer TBA Knights Group— UK regional legal and professional services businesses. FYApr18 rev £34.9 million and adjusted operating profit was £6.8 million excluding Turner Parkinson (acquiring on IPO). Offer TBA Aquis Exchange—a founder-led, pan-European Multilateral Trading Facility and exchange and regulatory technology developer and service provider is looking to join AIM. Offer TBC, expected 20 June. TransGlobe Energy Corporation—an independent international upstream oil and gas company with headquarters in Calgary, Canada is looking to join AIM. No Capital to be raised, market cap of £131m. Expected 29 June Block Energy— UK based oil exploration and production company whose main country of operation is the Republic of Georgia. Raising £5m at 4p. Mkt cap £10.3m. Due 11 June. Strongbow Exploration (TSX:SBW) intends to dual list on AIM. Holds rights to the South Crofty underground tin mine, a former producing tin mine located in the towns of Pool and Camborne, Cornwall . The project is estimated to require the Company to raise £25 million over the next 18 months to progress to a production decision. Offer TBS. Due June. Yew Grove REIT—newly formed Company will pursue its investment objective by investing in a diversified portfolio of Irish commercial property. Raising €75m at €1. Due 8 June
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06 Jun 18
Building a smarter future
Delivering infrastructure projects on time, to-spec and within budget has proved a minefield for corporates & politicians alike. Typically, 80% are late and 40% over-spent with little thought on how best to manage the asset once complete. Not exactly ideal, when total running costs over a property’s 25-40 year life, can be >4x the upfront capex. Luckily things are changing...and fast. Here technologies, such as data analytics, IoT, VR/AR, robotics & artificial intelligence, are transforming the $8 trillion global construction market. In turn helping to drive strong demand at Elecosoft (ELCO), a leading BIM (Building Information Modelling) software developer.
17 May 18
Small Cap Brunch
Codemasters Group— video game developer and publisher, specialising in high quality racing games. Offer TBA. Seeking £15m in primary. Due 1 June. Strongbow Exploration (TSX:SBW) intends to dual list on AIM. Holds rights to the South Crofty underground tin mine ("South Crofty"), a former producing tin mine located in the towns of Pool and Camborne, Cornwall . The project is estimated to require the Company to raise £25 million over the next 18 months to progress to a production decision. Offer TBS. Due June. Maestrano Group, a software company with operations in Australia (main country of operation), the UK, US and the UAE, is looking to join AIM. Offer TBC, expected late May. Yew Grove REIT—newly formed Company will pursue its investment objective by investing in a diversified portfolio of Irish commercial property. Offer TBA. Due Late May Team17 Group -video games label and creative partner for independent developers. Since 2014, delivered a revenue CAGR of 69% (31 December 2015 to 31 December 2017), with revenues of £29.6m and Adjusted EBITDA of £12.9m. Offer TBA Serinus Energy -international upstream oil and gas exploration and production company. Its principal assets are located in Romania (development phase) and Tunisia (production phase). Raising c.£10m at 15p. Due 18 May. Mkt cap £32.6m
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17 May 18
Leading the way
Elecosoft has reported a strong 2017 year, with profitability ahead of our expectations on strongly growing revenue. The group has generated cash, has moved to a net cash position, and is enjoying success on a number of fronts. Elecosoft has market-leading positions in a range of segments, and continues to blaze the trail for adoption of technology in construction and related industries. With 2017 delivering a good result, we look to the future with confidence.
04 Apr 18
FY 2017 sees notable earnings and cash flow
A strong performance from the construction software specialist saw its FY results comfortably beat expectations and deliver 26% EPS growth due to crossselling and combined sales approach. We ease back an over-aggressive 2018 revenue forecast but with improving margins and lower tax rates, we lift earnings and cash flow forecasts. Elecosoft has become a market-leading provider of construction software and training, across all phases of a construction project and beyond, into the lifecycle of buildings. We lift our target price to 65p.
27 Mar 18
Artilium (ARTA): Corp Excellent interims lift FY expectations | Destiny Pharma (DEST): Corp Resisting resistance: funded to Phase IIb inflection point | Elecosoft (ELCO): Corp FY 2017 sees notable earnings and cash flow | eServGlobal (ESG): Corp Mastercard works with HomeSend | Horizonte Minerals (HZM): Corp 2017 annual results | K3 Business Technology (KBT): Corp Clarity and cash | Orchard Funding Group (ORCH): Corp 22% progress | Quartix (QTX): Corp AGM hears of insurance pressure | SCISYS (SSY): Corp Space delivers a strong year | STM (STM): Corp A watershed year
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27 Mar 18
Second half saw continued progress
Elecosoft has released a trading update for its financial year to the end of December 2017. Revenue and PBT are expected to be ‘significantly higher’ than 2016 and in line with market expectations. We make no changes to our estimates ahead of the final results which are scheduled for March. This suggests that Elecosoft built on a robust set of H1 numbers and maintained momentum during the second half of the year. As at the half year mark, the Group noted the positive influence of exchange rate movements. Management comments that the unified branding was well received by the market during the year. In addition, the focus of the sales strategy on acquiring new direct customers has underpinned the strong trading performance during 2017. Training and support for customers has continued to produce new customer wins and high retentions. ICON has been a useful contributor. In all, the announcement suggests that Elecosoft has continued to benefit during the second half of 2017 from the clear progress which drove a strong performance in H1. The Group remains well-positioned in an attractive market.
23 Jan 18
Elecosoft* (ELCO): FY meets growth expectations (CORP) | Velocity Composites* (VEL): Accelerating sales and development investment (CORP) | Flowtech Fluidpower* (FLO): Positive year-end trading update (CORP) | Ideagen* (IDEA): Interims: strong recurring revenue growth (CORP) | OptiBiotix* (OPTI): Further human taste studies for SweetBiotix (CORP) | dotDigital* (DOTD): positive trading update (CORP) | Castleton Technology* (CTP): Contract wins (CORP) | SCISYS* (SSY): SCISYS sitting comfortably (CORP)
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23 Jan 18
Small Cap Breakfast
Hydrominer GmbH, An Austrian cryptocurrency miner, is considering an initial public offering (IPO) on the London Stock Exchange AIM during 2018 according to an article on Bloomberg | Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC | Cradle Arc—holding company of a group of companies focused on the exploration and development of precious and base metals projects in Africa. Offer raising £2.4m with market cap of £20.13m. Expected 24 Jan 2018 | OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m.
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23 Jan 18
Small Cap Breakfast
Panthera Resources— The Company was established to act as a holding company for Indo Gold Limited, an unlisted Australian registered company. The Company aims to explore and develop gold assets in India and West Africa. Offer TBC, expected 20 Dec 2017 Sumo Group—one of the UK's largest independent developers of AAA-rated video games providing both turnkey and codevelopment solutions, including initial concept and pre-production . Offer TBC. Due late Dec Pelatro—provider of proprietary software solutions to enterprise-level customers for various aspects of precision marketing for use in B2C applications. Offer TBC, expected 19 December 2017 Fusion Antibodies—Belfast based contract research organisation providing services to biopharmaceutical and diagnostics companies that are involved in the development of antibodies for both therapeutic drug and diagnostic applications. Offer TBA. Due Mid Dec. Sirius Petroleum—RTO. Becoming an operating company in the Ororo Field in Nigeria. Raising £7.2m/ Mkt Cap £35.6m. Due 19 Dec. Bushveld Minerals—RTO of Bushveld Vametco and therefore 78.8% of Strategic Minerals Corporation, the intermediate holding company that owns a 75 per cent. interest in the Vametco Vanadium Mine. Range Resources— oil and gas company listed on the ASX plans to admit to AIM on 13 Dec with market cap of £17.4m. Also acquiring Range Resources Drilling Services Limited, an oil services business based in Trinidad & Tobago with extensive drilling capabilities. Eqtec—Company with access to a proprietary advanced gasification technology used in industrial size power plants to convert waste into synthetic gas to generate electricity. Raising £1.6m. Mkt Cap £8.7m. Due 21 Dec. Volex VLX.L—The global provider of cable assemblies is proposing to move from the main market to AIM on 19 January. £71m market cap. FYMar18E rev £241.5m and £7.19m PBT Miriad Advertising—Global video advertising company incorporated in 2015 and is engaged in the development of native invideo advertising. 2016 rev £0.7m and £7.3m operating loss. Offer TBA. Expected 19 Dec. OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m.
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07 Dec 17
The Joy of Techs
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.
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09 Nov 17
A good H1 is driven by ICON and FX
The specialist construction building management software supplier reported a strong first half including a full six months of the ICON business acquired last October. The acquisition and the weakness of Sterling helped to see 14% top-line growth and, due to operational gearing, over 50% growth in adjusted earnings. Operationally, there has been continued cross selling of products across regional markets and customer bases and all the ranges are now being unified under the Elecosoft brand to facilitate this. There have also been moves into new geographies such as the US, Canada and Australia, and new products such as IconVR and the Powerproject SaaS have been deployed. The outlook is positive despite challenging and uncertain conditions and we reiterate our FY 2017 expectations and raise our target price to 55p on the performance and greater confidence in our FY forecasts given H1 performance and cash flow.
25 Sep 17
Independent Oil & Gas* (IOG): Pieces falling into place (CORP) | Elektron Technology* (EKT): Further strategic progress (CORP) | Elecosoft* (ELCO): A good H1 is driven by ICON and FX (CORP) | Hurricane Energy (HUR): Lancaster EPS approved (BUY) | Hurricane Energy (HUR): Lancaster EPS approved (BUY) | Hurricane Energy (HUR): Lancaster EPS approved (BUY) | Nasstar* (NASA): Growth and efficiency (CORP) | SRT Marine Systems* (SRT): Loan notes will fund satellite data project (CORP) | Trifast^ (TRI): Trading update, progress in line with expectations (BUY)
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25 Sep 17
Small Cap Lunch
GetBusy PLC—Sch1 from the holding Company of its subsidiary undertakings, which operates as a document management software business with over 110 full time employees, headquartered in Cambridge, UK and operating across the UK, USA, Australia and New Zealand. Capital to be raised via a rights issues of £3m at 28.3p with anticipated market cap of £13.7m. Work Group PLC—Sch1 from the Company that proposes to acquire the entire issued share capital of Gordon Dadds Group Limited (GDG). GDG is an acquisitive law firm and a group of other complimentary businesses, including Prolegal, an acquisition vehicle model focused on smaller law firm. Capital to be raised is £20m with anticipated market cap of £40m. Quiz—Sch 1 from the omni-channel and international own brand in the women's value fast fashion sector. Offer TBA. Expected late July. Last year Quiz posted sales of £87.4m while pre-tax profits grew by 17pc to £5.7m . Arena Events Group -provider of temporary physical structures, seating, ice rinks, furniture and interiors. Raising £60m. Mkt cap £63m. Expected on the Chef’s birthday, 25th July. Altus Strategies—African focused natural resource Company. Offer TBC. Expected Mid July. Harvey Nash Group— Provider of professional recruitment and offshore solutions moving to AIM from Main. No capital to be raised. Mkt Cap c. £57.8m. Greencoat Renewables - Schedule 1. Targeting a portfolio of operating renewable electricity generation assets, initially investing in wind generation assets in Ireland. Offer TBC. Due Mid July. I3 Energy –Schedule 1 Update. Independent oil and gas Company with assets and operations in the UK. Offer TBC, Mid July Admission. Verditek— Sch 1 update. The Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission late June. Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Prospectus yet to be published. Impact Investment Trust—Exposure to a diversified portfolio of funds providing SMEs across developing economies with the growth capital they need to have a positive impact on the lives of the world's poorer populations. Raising up to $150m at $1.00. Curzon Energy—Report on Proactive Investors of intended LSE float this year with acquisition of coal bed methane assets in Oregon. Looking to raise £3m plus. NLB Group—financial and banking institution based in Slovenia, with a network of 356 branches. Seeking Ljubliana Stock Exchange listing with GDRs on the LSE. Expected mid June. Kuwait Energy— has not been able to complete its initial public offering as announced in its Intention To Float of 3 May 2017. However, in light of positive feedback from potential investors, the Company remains committed to obtaining a London listing and continues to explore its options. Supermarket Income REIT– Up to £200m raise to acquire a diversified portfolio of supermarket real estate assets in the UK, providing long-term RPI-linked income. Due 21 July.
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17 Jul 17
Better by design
Elecosoft is a long-established and increasingly international group, focused on the provision of software tools in the digital construction sector. The group boasts a broad but well-aligned product range, strong go-to-market propositions, and a clearly defined strategy. We initiate coverage with this summary of the group’s activities, and will publish more-detailed documents on specific aspects in due course.
04 May 17
TMT Update 03.04.17 (CALL.L, KBT.L, ELCO.L) RM
CloudCall (CALL.L, 97.5p/£19.9m) Prelims and meeting with management: KPI momentum (28.03.17) | K3 Business Technology plc (KBT.L, 252p/£80.1m) Interims: Difficult H1 (21.03.17) | Elecosoft plc (ELCO.L, 40.5p/£30.3m) Prelims: ICON adds customers and cross/upsell opportunities (27.03.17) |
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03 Apr 17
The Joy of Techs
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.
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27 Mar 17
Steadily building profits
The construction design and delivery software group has delivered another excellent year of progress since the divestiture of its last legacy building materials and services businesses to become a pure software play. Furthermore its pan-European operations have seen Swedish and German revenues and profits leap in sterling terms after the Brexit devaluation, and clever handling of debt and cash has maximised its balance sheet benefit. The H2 acquisition of Icon adds property management solutions to an impressive product range; SaaS revenues; and an impressive client base of leading retailers. The outlook is for further growth in revenues, margins and cash generation. We introduce FY 2018 forecasts and lift our TP to 50p.
27 Mar 17
Elecosoft* (ELCO): Steadily building profits (CORP) | Bioventix* (BVXP): Interim results lead to upgrades (CORP) | Hurricane Energy (HUR): Halifax discovery (BUY) | KBT Business Technology* (KBT): interims and contract win (CORP) | Independent Oil & Gas* (IOG): Licence updates (CORP)
ELCO BVXP HUR KBT IOG
27 Mar 17
Joy of Techs
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*.
ELCO 7DIG AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD EGS 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 WJA
21 Nov 16
SaaS model strengthened through acquisition
Elecosoft has acquired Integrated Computing & Office Networking Ltd (ICON) for a total of £2.4m in cash and shares. ICON is a leading SaaS provider of building information management and storage systems, principally to the UK retail sector and its purchase is thus consistent with Elecosoft’s strategy of investing in SaaS technology to grow its customer reach and strengthen its position as an international provider of innovative, market-leading visual software applications.
17 Oct 16
Avacta* (AVCT): Act now (CORP) | Tristel* (TSTL): A strong FY 2016 (CORP) | Bioventix* (BVXP): FY 2016 results (CORP) | Elecosoft* (ELCO): SaaS model strengthened through acquisition (CORP) | Lok’nStore* (LOK): NAV up 28% (CORP) | Omega Diagnostics* (ODX): Mid year trading update (CORP) | Mortice* (MORT): Positive trading update (CORP)
ELCO TSTL BVXP LOK ODX MORT
17 Oct 16
Building an international business
This is a good set of interims for the architectural and construction software supplier, showing sales and earnings growth assisted by FX moves and generating cash, which prompts an initial dividend declaration. Stripping out the sale of the Swedish architectural practice last December, on a LFL basis H1 revenue was up 10% YoY to £8.8m; although only 6% at constant currency. Encouragingly, 47% of the sales were recurring support & maintenance income. Because of that, gross margins for the software business remained high at 87% while operating expenses - although still comparatively heavy - were controlled, so operating margins improved 90bp to 8%, the gearing delivering 25% growth in adj. operating profit to £0.7m. With debt paid off in H2 2015, there was little interest charged so adj. PBT rose 32% to £0.7m and adj. EPS rose 23% to 0.7p. While assisted by the improved FX rate boosting its European (Swedish/German) earnings, this is still a good performance in line with our expected 25% earnings growth for the year and we make no changes to our FY 2016 forecast for £17.2m sales and FD adj. EPS of 1.3p. There was also notably good cash conversion as trade debtors were collected, seeing £1.4m from operations and only £0.3m capex, ending the period with net cash of £0.3m, from the net debt of £0.8m at the end of last year. Underlining management confidence, an interim dividend of 0.15p, has been declared, with the prospect of a FY dividend at 4x EPS cover; a prospective yield of 1.3% on the current price.
21 Sep 16
The Joy of Techs
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.
ELCO 7DIG AN AMO ARTA BVC BOTB CTP CITY D4T4 DTC DOTD EGS 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 WJA
15 Aug 16
The Joy of Techs
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.
ELCO 7DIG AN AMO ARTA BVC CTP CITY DTC DOTD EGS 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
04 May 16
The Joy of Techs
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.
ELCO 7DIG AN AMO ARTA BVC CITY CNS DTC DOTD EGS 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
03 Feb 16
Keywords Studios: The stars align – initiation of coverage (BUY) | Shoe Zone: Analyst interview (BUY) | Castleton Technology*: Comfortably in line (CORP) | Servoca*: Year-end trading update (CORP) | Elecosoft*: Sale of legacy architects practice (CORP) | Europa Oil & Gas*: Wressle development (CORP)| Photo-Me*: AGM statement (CORP) |Sound Energy: Sidi Moktar acquisition update (BUY)
ELCO KWS SHOE EOG PHTM SOU CTP SVCA
22 Oct 15
June 2015 Monthly - Accounting Issues For Investors – An Occasional Series – Part 1
Alliance Pharma | City of London Investment Group | ELECO | Empresaria | Futura Medical | Grafenia | Lombard Risk Management | MedicX Fund | Murgitroyd | PPHE | Primary Health Properties | R.E.A. Holdings | Sanderson | Tethys Oil AB | United Cacao Limited SEZC | Verona Pharma
ELCO APH CLIG EMR FUM GRA LRM MXF MUR PPH SND TETY CHOC PHP VRP
02 Jun 15
Initiation and FY 2014 results
With the release of FY 2014 results we initiate coverage of this exciting company providing leading-edge software for the global construction industry. 2014 was a year of transition for ELECO; a year in which it shed the last vestiges of the old building materials conglomerate to become entirely a technology group. During the period it restructured and refinanced, brought in dynamic yet experienced new management and started the process of integrating a disparate portfolio of companies and products into a focused cohesive operation; all while meeting market expectations and showing good growth and profits. The group entered 2015 with a strengthened balance sheet, a huge installed base, strong IP, a broad portfolio and a strong pipeline of opportunities from a buoyant construction industry. We believe it has the opportunity to cement a key position at the heart of this huge global industry as the latter adopts new technology to bring greater efficiency to its complex structure of interested parties.
05 May 15