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FY16 results were ahead of forecast and sales momentum remained strong in the first four months of FY17. The next iteration of the platform, GIANT 2017 marks a step-change in usability and functionality and with a growing network of sales partners, this should underpin sustained revenue growth. This progress is not reflected in Fusionex’s EV/EBITDA rating which despite its higher margins, is the lowest in its peer group at 13x FY17e.
Fusionex International
FXI (the big data, IoT, AI and Deep Learning software provider) announces a contract win that is expected to generate $1m of revenue “over time”, for its next generation Big Data platform, GIANT 2016, with a major Asian bank. The client, which has a presence in thousands of locations across Asia, will be using FXI’s Big Data solution to accelerate its move into digital banking and cognitive computing.
“Positive momentum experienced in FY’16 to continue in the current year”
Fusionex’s year-end trading update indicates that revenues will be in line with market expectations (we estimate 16% revenue growth in FY16) and that a strong pipeline for GIANT 2016 should drive further momentum in FY17. The planned increase in sales, marketing and other investment to support adoption of GIANT has been more moderate than we forecast, meaning that EBITDA is expected to be significantly above consensus. We upgrade our FY16 EBITDA by MYR3.2m (83% but from a compressed level) to reflect this, while leaving our estimates for FY17 and FY18 unchanged.
Fusionex International (FXI.L) | Rex Bionics (RXB.L) | Crossrider (CROS.L) | Cerillion (CER.L) | Sunrise Resources (SRES.L) | Premier Asset Management Group (PAM.L) | Faron Pharma (FARN.L) | Frontera Resources Corp (FRR.L) |
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Fusionex’s big data analytics solution, GIANT, has demonstrated that it can compete against the major industry vendors. The launch of GIANT 2016 further enhances the offering, including improved support for SaaS delivery to open up the largely unaddressed SME market. Enabled by the £14m fund-raising last October, investment has been stepped up to support a more ambitious growth strategy. While margins will be affected, the market opportunity is significant, GIANT’s reputation is building and this should provide the impetus for ongoing strong growth. This is not yet reflected in the shares, which discount a fairly benign outlook.
A week ago big data software company Talend IPOd on Nasdaq. Shares enjoyed a 40% first day ‘pop’. Over on LSE there was no move in sympathy for the big data plays as here concerns about slowing growth and Brexit overshadowed the opportunity. We think that investors who look at the trend will see that Fusionex is not impacted by Brexit; GIANT 2016 is already creating a new growth spurt and it offers exposure to the Asian region. Fusionex shares were oversold on concerns about (i) cash generation (since addressed) and (ii) its move to making a loss reversing its track record of profitability (addressed by our Interim upgrades). Like Sophie in BFG, investors might be naturally scared of GIANT at first, but should soon realise that this behemoth is actually quite gentle and charming, not a Bloodbottler or Fleshlumpeater. We believe that Fusionex will undoubtedly use the same playbook as with the initial GIANT release – and thereby sell to ‘beta’ customers. Positive customer newsflow will in turn create positive earnings momentum and hence we retain our Buy.
Another week and another banner deal for GIANT 2016 – I know, dear investor, the product has yet to be formally released, but it is already walking off the shelves. Here too we have a contract which shows how ‘data’ is being used as a competitive weapon in many industries to better serve customers by improving speed and quality, hence setting themselves apart from their competitors as the destination of choice. Retain Buy.
Fuisionex’s GIANT 2016 has just secured a significant multi-year contract with “one of Asia’s leading resort providers”. This is a new client win and Fusionex beat IBM and Oracle to win the contract. The contract shows how ‘data’ is being used as a competitive weapon in many industries to better serve customers by improving speed and quality, hence setting themselves apart from their competitors as the destination of choice. Retain Buy.
It’s here – well the soft launch is, as Fusionex announced GIANT 2016 to marketing; in industry parlance, this is the ‘soft launch’. While there are few details at this juncture we expect that it will target SME and enterprise segments with a combination of Big Data Analytics and IoT capabilities. Recall that at interim results, 1 June, CEO Ivan Teh commented that the launch of GIANT 2016 will open up new addressable markets, substantially expanding the potential reach, and represents a key milestone in their strategy to accelerate growth considerably over the next few years. Remember, there’s no Brexit impact – so the shares should be considered a safe haven in these turbulent times. We retain our Buy.
Once every new customer was greeted with banners, ice cream and fireworks – now, as the client list grows and grows we only learn about new client wins as we thumb through the trade press. To wit: Fusionex has won a contract from Malaysian broadband services provider REDtone. Fusionex will provide data management services for the REDtone flexiCloud business-to-business cloud service. Fusionex has upsold the client with a range of applications including analytics, loyalty management, and reservation management. The even bigger news is that it looks like 28 June for the Giant V2 launch – gentlemen, set your clocks! Shares have been weak of late. Remember, Fusionex is not impacted by Sterling’s decline and operationally is immune to Brexit. It is an excellent ‘hedge’ – or a place to hide. We retain our Buy.
A barnstorming period punctuated by 32 new GIANT customers, 12 YOY, taking the total to 68, 25 YOY. EBITDA was dented due to the planned spend to RM7.2m, RM16.89m YOY. Positively; (i) Operating cash, post working capital, was RM5.82m, up from RM5.21m YOY despite lower levels of profitability, (ii) Fusionex improved cash collections and, (iii) following last year's fund raise there is no shortage of cash, RM124.91m. (iv) Fusionex talks about a substantial new business pipeline and, as expected, GIANT 2016 is on the cusp of its debut. In line with prior thinking this will feature both high end and an SME targeted offer which will increase TAM. The results consolidate the recovery in the share price which was over-sold in the wake of FY results. Our forecasts changes reflect; (i) our early EBITDA was too pessimistic (phasing of cost increase) so we increase our RM-3.5 EBITDA to RM0.8m. (ii) We increase net cash assumptions due to better working capital -primarily Fusionex has changed DSO. We are encouraged as the results address the mainstay of concerns following FY results while the strengthening revenue growth illustrates that those new investments have indeed re-calibrated growth, in the wings a new impressive product should lead to further large client wins. The latest subsector M&A, Marketo, points to significant valuation upside. We retain our Buy.
Fusionex has “promised” to widen its ecosystem to bring in partners, both tech and sales partner related, in order to drive a more leveraged sales mode. Fusionex is delivering on this by inking a strategic partnership with VADS, Telekom Malaysia's subsidiary company and one of Malaysia's leading Integrated Managed ICT / Business Process Outsourcing service providers. This comes in the wake of the pleasing trading update from Fusionex saying interim results (ended 31 March) will be in line with market expectations. Company also reminds that GIANT 2016 is on track for launch. In line with prior thinking this will feature both high end and an offer targeted to SMEs – this will increase TAM. The next share catalyst is the interim results. We retain our Buy.
A pleasing trading update from Fusionex saying interim results (ended 31 March) will be in line with market expectations. Company also reminds that GIANT 2016 is on track for launch. In line with prior thinking this will feature both high end and an offer targeted to SMEs - this will increase TAM. The next share catalyst is the interims in May (no date) and we retain our Buy.
The data gang were in Dublin this week for the Hadoop Summit, Europe’s largest gathering of big data management professionals. Whilst we attended from the safety of our desk in One New Change (London), we noted: the Guinness aftertaste was palpable, so too was the overriding message of customers wanting ‘simplicity’. This in part grated against vendor messages of the importance of the latest and greatest tools. In our view, the Dublin event showed that Big Data is starting to mature given the heightened interest in sleeves rolled-up enterprise deployment rather than the bleeding edge of shiny tech baubles. All in, a positive read across for Fusionex, GIANTs core product promise (simplicity) and sales volume estimates. The next share catalyst is the interims in May (no date) and we retain our Buy.
With a strategic alliance with Cloudera, Fusionex now has the Hadoop distro world signed up to its analytics platform. It is interesting to note how the Hadoop distros have changed operating models recently with Hortnonworks pivoting to cyber security and Cloudera to analytics. We remind: (i) Fusionex has a SPARC team so also covers the ‘realtime’ side, (ii) with this deal both companies extend their reach across a global marketplace – although we still see Fusionex has focused on ASEAN region and, (iii) this deal dovetails with the Fusionex strategy of widening its sales channel and creating a leveraged (ie more profitable) sales model. In addition to the strong valuation driver, shares are now trading on 2.3x EV/Sales for 2017E. The next catalyst is the forthcoming product release of GIANT BV2 in H1 with the usual H1 trading update (period to 31 March) expected in April. Buy.
On 22 January Fusionex looked to assuage concerned investors by giving an update on DSO collections. This followed the fall in the share price prompted by poor cash conversion at interim results. Fusiuonex collected 82% of the receivables. We had commented that the growth of the Group's partner channel network plus period end sales (ie those extra 6 GIANT wins) resulted in an increase in trade receivables. Our positive view continues to be underpinned by the current strong sales momentum, the 35% revenue growth in 2015A, visible sales traction 2016YTD and comments of a continuing strong pipeline. In addition to the strong valuation driver – shares now trading on 2.7x EV/Sales for 2017E, the next catalyst is the forthcoming product release of GIANT v2 in H1 with a H1 trading update (period to 31 March) expected in April. Buy
Tech guru Geoffrey Moore tells us that to succeed tech companies need to have a Gorilla position in their market – Fusionex's GIANT is one such gorilla. Today Fusionex delivers results ahead of expectations due to better than expected GIANT product sales which in turn feeds to an EBITDA beat RM33m vs our RM29m estimate with revenue RM77m vs our RM68m target. To reflect the beat, the accelerating market opportunity and the recent cash raise we see Fusionex in investment mode through 2016 as it dramatically increases forecast sales. The developing operating model emphasises a new GIANT product family (more details promised end of calQ1), a more channel-led sales model (indirect was 30% of 2015A revenue) coupled with a wider geographic footprint (new offices planned in Vietnam, Australia, China and Taiwan). Our expectations are underpinned by the current strong sales momentum, the 35% revenue growth in 2015A, visible sales traction 2016YTD and comments of a continuing strong pipeline. Buy as we increase target price – it is a blend of revenue growth and DCF to 744p (from 722p). Fusionex is our SMAC stock of 2016.
The latest US$1m contract in the public sector sees GIANT support the customer, a government agency, ‘Open Data' initiative to achieve increased transparency, accountability and accessibility to government data that is neither confidential nor sensitive. As ‘Open Data' gains prominence internationally, this win again demonstrates GIANT's abilities to manage data in an efficient and user-friendly way. Ahead of final results we maintain our Buy but will not increase estimates until publication of finals later this week.
The first win in the healthcare market demonstrates the suitability of Fusionex GIANT in a new market. To be sure TAM increases, but more importantly Fusionex now has proven ability to execute on the market opportunity. As per usual the client name was not disclosed, nor contract duration nor value, but we guestimate a usual multiyear contract with a few US$100k value. We are most impressed with the multi-layered use case – this should become a superb client reference. We make no forecast changes ahead of forthcoming final results (21 January) which have already been pre-announced as a ‘beat'. Ahead of this we are relaxed with our on-going Buy recommendation.
Malaysia retains a familiar feel. The country is green, it rains a lot, the locals drink tea and enjoy gardening. Malaysia is also moving at speed to the future. Kuala Lumpur's impressive skyline screams ‘Look at me. I am the future'. Fusionex inspires the values of the past (customer service and product excellence) but tells us more about the future and the era of business insights. The latest partnership with behemoth Dell simply illustrates this. To remind: on 15 October last, Fusionex announced that it had beaten FY market expectations, largely due to continuing strong demand for its big data analytics solution, GIANT. The company also raised £14m to fund growth. Following our fleeting trip to Fusionex HQ last week we reiterate our view that Fusionex is a superb play on the booming big data/Analytics market. It is our SMAC top pick for2016. Buy. As Wizzard would croon – “Okay you lot – take it!”
Fusionex announces that its latest GIANT contract win with an unnamed “Asian Regional Patents Registration Office”. As usual, the contract value was not disclosed – we guesstimate a three year annuity term multi-year contract where the value is likely to be in the hundreds of thousands per annum. Using Fusionex GIANT the Patent Office should be able to offer value and insight from its evaluation, certification, records-keeping and approval standpoint – therefore in a win-win-win GIANT should be a boon for the customer and the customer's customers. To remind: on 15 October last, Fusionex announced that it had beat FY market expectations, largely due to continuing strong demand for its big data analytics solution, GIANT. The company also raised £14m to fund growth. In our view, Fusionex is a superb play on the booming big data/Analytics market. Fusionex is our SMAC top pick for 2016. Buy.
We recall about a year ago commenting on a Fusionex customer, the TRIUM CARD loyalty programme. Some 12 months on TRIUM CARD celebrates its first anniversary with news that it has 122,000+ members. In a win-win Fusionex rewards consumers and empowers merchants. To remind: on 15 October last, Fusionex announced that it had beat FY market expectations, largely due to continuing strong demand for its big data analytics solution, GIANT. The company also raised £14m to fund growth. In our view, Fusionex is a superb play on the booming big data/Analytics market. It is our SMAC top pick for 2016. Buy.
“This partnership with Fusionex is important because it would enable us to offer solutions and services encompassing business intelligence, business analytics, IoT (Internet of Things) and Big Data applications” – that is Dell (remember February, 2013 US$24.4Bn leveraged buyout deal) talking about Fusionex. We have long said that Fusionex is a superb investment play in the growing Big Data market as an established, profitable, cash generative company which operates at the beating heart of the segment – i.e. analytics – once again this out-turn proves it. Note Dell currently buying EMC in a US$67Bn deal nets Fusionex more big data skills and widens the customer base. We retain our Buy and 722p target price. "This time next year we'll be millionaires.”
In a release to the KL exchange Managepay Systems Bhd announced that it had signed a partnership agreement with Fusionex to explore developing a payment gateway. It is pleasing to see Fusionex build out its channel ecosystem thereby increase sales reach. Also ‘pointing' Giant at payment gateways, illustrates that the platform has a wide ‘horizontal' applicability. Globally, the entry of Apple Pay and Google Wallet into the payment business has only added more heft to the story, underlining the huge potential and opportunity for internet disruption. In India, where most of the population doesn't have credit and debit cards, and the mobile phone is fast becoming a tool that brings that and as e-commerce takes off, payment could be next the big business. After travel, classifieds and e-tailing, payments will be the next big thing. We have long said that Fusionex is a superb investment play in the growing Big Data market as an established, profitable, cash generative company which operates at the beating heart of the segment – i.e. analytics – once again this out-turn proves it. We retain our Buy and 722p target price.
They smashed it. Fusionex says that FY ended ahead of market expectations due to GIANT sales where demand “remains strong”. In addition the company announces an over-subscribed placing which should further accelerate growth. We have long said that Fusionex is a superb investment play in the growing Big Data market as an established, profitable, cash generative company which operates at the beating heart of the segment – ie analytics – this out-turn proves it. That the placing was (i) well over-subscribed and (ii) at a 1.5% discount suggests that investors share the view. Whilst we are confident that forecasts are trending up, for the short term we have simply reflected the funds raised in our estimates unchanged until we get further clarification as to the FY result. We retain our Buy with our target price increased to reflect the capital input, from 692p to 722p.
The latest gong helps to cement the view that Fusionex is building a GIANT brand as it nets the most prestigious award ‘Most Outstanding ICT Company' at the Asian-Oceanic Computing Industry Organisation ICT Leadership Awards Ceremony. We recall a dd trip to KL a number of years ago where there was low name recognition of Fusionex – that the company has now won the Players Player of the Year award, not just in KL, but for the entire ASEAN area is a testimony not only to Mr Teh but what the entire team has achieved. Once again in our view, management's target of 30 GIANT customers by the end of this FY looks ‘do-able' in the light of the current 25 sites and commentary that it is seeing “significant potential for growth particularly within the Travel & Hospitality, Retail, Manufacturing and Smart Government sectors” – to us this suggests a widening sales dragnet. Momentum is clearly accelerating, as of the 25 GIANT accounts 12 were signed in H1A. We have long said that Fusionex is a superb investment play in the growing Big Data market as an established, profitable, cash generative company which operates at the beating heart of the segment – ie analytics. We retain our Buy recommendation.
Investors have seen how successful Fusionex's GIANT big data platform has been. Attending a big data roundtable in KL recently Fusionex CEO Ivan Teh gave investors an inkling of what to expect from his next UK roadtrip when he talked about “a marked increase” of interest in Big Data. “A year or two ago, only 25 – 30% of the CEOs we talked to were interested in or in the midst of implementing BDA [Big Data Analytics] projects. Now the number has doubled to 60%.” CEO interest in analytics was given a further endorsement in the latest Accenture Analytics study – it concludes that 59% of “high performer” firms invest “more than one-quarter of their total technology expenditure in analytics, vs. 17% of low performers”. We have long argued that Fusionex is a superb investment play in the secular Big Data trend; Fusionex benefits from being an established, profitable, cash generative company which operates at the beating heart of this growing segment. Buy up to our 692p target price.
While the fall in the Malaysian ringgit has unnerved some investors, the truth is that the impact on Fusionex is more psychological, as the company translates back to ringgit making the numbers look better. This also a benefit in that dollar-based vendors are net losers giving Fusionex a competitive helping hand. In the wake of the recent Takaful Insurance GIANT contract we had a discussion with CEO Ivan Teh to get an impression of the sales momentum and why GIANT is making such strong progress – our summary is included. We have long said that Fusionex is a superb investment play in the growing Big Data market as an established, profitable, cash generative company which operates at the beating heart of the segment – ie analytics. No change to our estimates. We retain our Buy and 692p target price.
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