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.
Since launch in 2013, Fusionex’s GIANT has established an early foothold in the rapidly growing market of big data analytics. The strategy now is to capitalise on GIANT’s growing reputation as a usable and affordable alternative to the high-cost offerings of the software industry majors. Version two of the software, GIANT 2016, was launched at the end of June. It adds new features and can be configured on a self-service basis, opening up the addressable market beyond the enterprise to SMEs. The company is widening its reach by increasing the use of indirect sales channels, establishing additional offices overseas and stepping up marketing.
The company announced a step change in investment to support a more ambitious growth strategy in January, which is affecting the group’s historically high margins near term. However, the potential market is significant – IDC forecasts that it will be worth $49bn in 2019 and GIANT has strong momentum. It reported 79 customers in June 2016 vs 36 in September 2015, when management also stated there were “no signs of growth slowing”, and three contracts have since been announced. We reinitiate forecasts, which look for 35% CAGR in revenues to FY18 and EBITDA break-even this year, with margins rebuilding rapidly in FY17 and FY18.
Our reverse DCF suggests the current share price is discounting our forecasts, followed by revenue growth of around 10% to FY25. While not insignificant, this is fairly benign for a high-quality product so early in its sales cycle (we forecast GIANT sales to double this year), in a rapidly growing global market. Evidence that the current momentum can be maintained could lead to considerable upside. For this, we look for news of major client wins – both within the enterprise and SME market – and progress with the indirect channel strategy, which is key to cost-efficient scaling.