finnCap Research Company Notes - 22 January 2019
Jan 22, 2019 / News
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Sector: Technology & Telecoms
dotDigital (DOTD) : Corp
Interim trading update
Key data
- Share price (p) 82.0
- Target price (p) 135.0
- Market cap (£m) 243.8
- Enterprise value (£m) 227.2
The interim trading update for the period to December indicates group revenue growth of 33% including 15% organic, with net cash at a very healthy £16.6m (1H18: £10.5m). The winning formula of more functionality, sold through more channels, in more territories, continues to have proven success: revenue from additional functionality grew 50%; channel success lifted revenue from new connectors (Shopify, Big Commerce and Shopware) to £1m, +372% in six months; organic international revenue grew 37%, lifting international sales to 30% of group (ex UK focused Comapi) – all leading to monthly ARPU improvement of 16%. While lower margin Comapi revenue was hit by performance of troubled UK retail customers, the additional functionality of the acquisition leaves omnichannel prospects for growth strong. We adjust revenue in FY19 and FY20 -5.6% and -2.3% respectively, all other numbers unchanged. Balance sheet strength retains the opportunity for further acquisitions to support organic growth, and we look forward to interims on 19 February.
Andrew Darley | adarley@finncap.com
Sector: Technology & Telecoms
Ideagen (IDEA) : Corp
Low risk and high activity in risk management
Key data
- Share price (p) 132.0
- Target price (p) 180.0
- Market cap (£m) 289.4
- Enterprise value (£m) 290.7
Interims are in line with guidance, as ever, including a boost in activity across the group, particularly SaaS and the US. 8% organic revenue growth was complemented by 67% recurring revenue (FY18: 62%), growing cash generation, and a continuing strong track record of acquisitions. The board structure implemented for FY19 is proving its worth, in delivering continuing operational excellence in addition to strategic acquisitions as the Integrated Risk Management market consolidates. Clients won in the period – household names including GlaxoSmithKline and McLaren Mercedes – reiterate product quality. Target 180p reiterated as Ideagen continues to lead the sector by example.
Andrew Darley | adarley@finncap.com
Sector: Technology & Telecoms
ZOO Digital (ZOO) : Corp
Trading update
Key data
- Share price (p) 115.0
- Target price (p) 180.0
- Market cap (£m) 85.5
- Enterprise value (£m) 88.1
While localisation revenues had normalised at the beginning of 2H19 (March y/e), ZOO has reported that a single material localisation project scheduled for completion in the period was cancelled for reasons outside the group’s control. Combined with a faster than expected decline in lower revenue but high margin Blu-Ray and DVD software, guidance is now for revenue 10% below former expectations. With a high degree of operational gearing, FY19 EBITDA will be significantly below expectations – we adjust from £3.4m to £1.0m, 2H remaining EBITDA and cash flow positive. Importantly, the pipeline of appointments as localisation preferred vendor with major media companies remains strong, and FY20 forecasts are unchanged, supported by further media companies announcing their move to launch OTT services. On that basis, our target price is unchanged, although we acknowledge that while forecasts continue to expect revenue growth, the market will require proof of greater growth momentum and new client win newsflow to regain confidence – a case of “when”, not “if”, we believe, but still pushed to the right.
Andrew Darley | adarley@finncap.com
Sector: Industrials
Velocity Composites (VEL) : Corp
Full-year results
Key data
- Share price (p) 22.0
- Target price (p) 50.0
- Market cap (£m) 7.9
- Enterprise value (£m) 2.9
After a difficult year, FY 2018 results were slightly better than reduced expectations, still achieving sales growth of 15% in the year. H2 performance was a marked improvement on H1. Operational progress has continued, with contracted business now £67m, albeit new wins are at a slower rate than anticipated at IPO. Forecasts remain under review, with an outlook pointing to a similar level of revenue and gross margin as 2018.
David Buxton | dbuxton@finncap.com