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Cheers Fredr.
The new Finncap note is 17 pages long and well worth a read.
A couple of nice extracts:
"Final thoughts The financial results do not truly reflect what a good year FY 2019 was for Pelatro. The switch from large upfront licences to smaller recurring-revenue contracts while scaling up for global sales and a managed services offering, has impacted the financials, but if we look beyond the headline numbers this is a company showing consistent growth in; customers, regions and offerings. By deepening its relationship with its customers, PTRO is building a secure base of recurring revenue and which made its name in developing regions but now beginning to challenge US market leaders in their own backyard."
"Valuation view From highs of near 100p, the share price has slipped steadily over the past 12 months as the company undertook its transition from selling upfront software licences over to recurring contracts. The lower revenue growth and the reduced earnings from the required investment made investors nervous. This has been exacerbated by the sudden impact of COVID-19 on the market leaving the stock deeply undervalued. The share price, along with the market in general, has rallied since mid-March lows.
The business currently trades on a forecast P/E of under 14x and an EV/EBITDA of under 6x both far too low for the growth and profitability the company has demonstrated. To that we can now add the security of starting the year with half of the expected revenue already secured under recurring revenue contracts. We continue to target 125p in the longer term as the stock and the market recovers."
The list of major shareholders is stellar:
Shareholders %
Bannix Management LLP* 39.9
Chelverton Asset Management 6.6
Rathbones Investment Management 5.4
Herald Investment Management 4.8
Artemis Fund Management 4.7
Killik & Co LLP 3.8
Hargreaves Hale Ltd 3.2
Maven Capital Partners 3.1
*Bannix is the investment vehicle of Kiran Menon, Varun Menon and Sudeesh Yezhuvath."
Tipped in IC today by Simon Thompson
'A reassuring trading update from Aim-traded Pelatro (PTRO:40p),a company that makes its money by providing telecoms operators with precision marketing software, has confirmed that the business has been unaffected by Covid-19, a point that makes the de-rating this year completely unwarranted. '
Moreover, Pelatro started 2020 with US$4m of recurring revenue already secured (a mix of support and maintenance, managed services and gain share contracts), and an effective annual run-rate of $5m. Add to that conversion of at least some of its last reported US$15m contract pipeline, and potential for higher demand from contracted work (existing customers account for a third of the bid pipeline), and finnCap’s 2020 revenue estimate of US$8m, up from US$6.5m in 2019, should drive a strong rebound in pre-tax profits and EPS to US$2.2m and 5.6¢ (4.9p), respectively. A 2020 PE ratio of 8 fails to capture that growth. Buy.
Zooming up today....
Finncap today retain their 125p target price and 5.6p EPS forecast for this year.
An encouraging and confident trading statement this morning.
Only a "limited effect" on the business as regards travel restrictions, and for their telecoms customers it's "business as usual", especially as these times of lockdown usually generate "more user spending and more targeted marketing".
Given PTRO's high recurring income and sector focus this is hopefully one company which should come through relatively unscathed and potentially much better than that.