finnCap Research Company Note - 21 March 2019

Mar 21, 2019 / News

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Sector: Support Services

Cello Health (CLL) : Corp

Investing in new initiatives and enhancing services

Key data                              

  • Share price (p)                  123.5
  • Target price (p)                145.0
  • Market cap (£m)                              127.7
  • Enterprise value (£m)                    133.1    

Cello has reported a good set of FY 2018 results with PBT +6%, EPS +14% (aided by lower tax), DPS +10% and net cash £6.3m up from £1.6m last year. 2017 acquisitions have continued to perform well and the Health division continues to broaden and deepen the client offering. Looking forward, the focus will remain on growing the group’s presence in the US and leveraging Signal’s digital capability into the healthcare sector. We do not anticipate making any major changes to our forecasts (apart from improved net cash and higher dividend), and reiterate our view that the market backdrop for Cello’s technically based, strategic marketing services is strong and defensive, supporting good growth prospects.

Guy Hewett


Sector: Technology & Telecoms

Sopheon (SPE) : Corp

Consistency in strong prelims

Key data                              

  • Share price (p)                  1 147.5
  • Target price (p)                1 500.0
  • Market cap (£m)                              116.4
  • Enterprise value (£m)                    103.7

Sopheon has again delivered strong prelims, reporting EBITDA of $9.4m for FY18 from original estimates of $7.4m, having been upgraded at the end of 3Q18 (to $8.0m) as well as post year end (to $9.0m). The strong 4Q performance of previous years began to manifest in 3Q this year, with 4Q still providing strong momentum. The perpetual enterprise licence model continues to attract new customers, often delivered on a hosted basis, contributing to a growing base of recurring revenue at a $15m run rate, including green shoots of demand for the SaaS version. Recruitment has proved a challenge, restraining costs to the benefit of EBITDA; however, the recruitment logjam now seems to have been solved into FY19 – this inward investment delivers a fillip to growth in maiden forecasts for FY20, with EBITDA growth of 17%. We lift our target price to 1500p (1400p), with a strong balance sheet ($16.7m net cash) offering all strategic options, including the 30% uplift in dividend from 2.5p per share in FY17 to 3.25p.

Andrew Darley

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