finnCap Research Company Notes - 2 August 2018

Aug 02, 2018 / Research Notes

Read our regular corporate finance notes featuring updates from the finnCap Research team's sector experts.

Download the full research note here

Sector: Technology and Telecoms

Elecosoft (ELCO): A good half of organic growth shown in H1

Key data                              

  • Share price (p): 80.0
  • Target price (p): 88.0
  • Market cap (£m): 62.0
  • Enterprise value (£m): 59.4

H1 saw continued organic momentum in the international construction industry solutions supplier. Solid 5% YoY revenue growth and impressive 45% YoY earnings growth, allied to excellent cash generation leave the group well positioned to at least meet our FY 2018 forecasts. H2 will be augmented by acquisition of Shire Systems, a leading UK facilities-management solutions supplier. The group is consistently delivering both organic and acquired earnings growth supported by cashflow. It remains undervalued compared to sector peers despite a strong market position and a wide range of future growth opportunities. We reiterate our forecasts and TP.

eServGlobal (ESG): PayMobile on track for cash breakeven

Key data                              

  • Share price (p): 8.4
  • Target price (p): 20.0
  • Market cap (£m): 76.2
  • Enterprise value (£m): 74.6

The Interim update shows the core PayMobile business remains on track for cash breakeven this year. Revenue was c.A$5.7m with a further A$10.2m of new orders in H1 to be recognised in future. This, alongside a reliable H2 pipeline, gives us confidence in our expectation of c.A$19m sales while the cost base has been heavily cut back to match. The funds raised last year have been put to use in restructuring and there will be some exceptionals in H1. That left cash at a low point of A$2.8m, but a large debt was collected in H2 and the position should improve by YE. With ongoing reduction of its cost base the core business is being shaped for corporate action and intriguingly, management now notes initial interest from a number of parties. HomeSend continues to develop its banking business with FY 2017 revenue growing 59% YoY. Following its recent funding it is investing heavily, and we continue to anticipate long-term success and value.

Lorne Daniel | ldaniel@finncap.com