StatPro has won a significant new contract, worth at least £1.2m over five years, with a global American financial institution. This follows last week’s £2.3m three-year contract win with a major Australian financial institution. We estimate that the two contracts will boost the group’s annualised recurring revenue run rate by c 2.7%, with growth potential. The two new contracts highlight the increasing potential for positive newsflow, as the group moves to late-stage cloud transition. Hence, with StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
The latest deal with an un-named American financial institution uses StatPro’s latest cloud technology to replace its legacy systems, and includes a small amount of services as is typical with such deals. This and the deal announced last week both include the Performance Module – the group’s core transaction-based performance measurement module - that replaces the traditional StatPro Seven solution and is set to be commercially launched in September. This reflects the desires of some customers to move to the front of the queue to be up and running by the official launch date, as the installation process can be complex, involving data transfer and data set-up processes.
We estimate the two new contracts will add c £850k, or c 2.7%, to the group’s annualised recurring revenue run rate, which was c £31.9m pro forma following the Investor Analytics acquisition. In our view, these deals underpin our forecasts and increase the risk to upgrades as the year progresses. StatPro prices its cloud solutions on the basis of the number of portfolios, and therefore there is the potential for the revenues from both clients to grow. Nevertheless, given the uncertainties over currency volatility and the imminent EU referendum and the reliance on additional new business through the year to meet our forecasts, we are conservatively maintaining our estimates.
StatPro’s stock trades on c 31x our maintained FY16e EPS, which falls to c 23x in FY17e. Alternatively, the shares trade on c 1.7x FY17e EV/sales, one-third of the level of StatPro’s larger US peers, which typically trade above 5x EV/sales, while US-based pure SaaS companies typically trade in the region of 4-6x EV/sales.