My notes from Feb: updated (1/2)16 Dec 2020 11:55
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I’ve updated my very high level notes from February. Market cap now ~GBP74m, ~2,000 employees. We’ll see how well my forecasts on cash balance, net profit and PE estimates stack up after tomorrow’s call with Soraya.
79% owned by wife (CEO) and husband (COO) team. It does construction, facilities mgmt and supply chain & logistics mgmt in places such as South Sudan, Somalia, Mozambique and the CAR, also a bit of middle east.
Revenue for 2020 likely to be USD64m-ish - lower than last year’s USD69.1m. Gross profit margin also lower (29.1% estimated versus 31.7m in 2019). Given sales and admin costs and tax (my estimates), I’m guessing net profit will be around USD9-10m (2019: USD12.9m). This gives a PE of 10 or 11 at current prices. I think the price is likely to stay in this region until more of the order book starts to come to fruition and they can show they’ve got through the virus relatively unscathed.
Pros
1. Founded 2004 and has geographical diversity in its projects and is expanding its regions and countries.
2. The management team are ex-NGOs and international development bodies. I suspect this is their life's work. They take modest salaries for directors of a listed company.
3. Barriers to entry in the areas they operate are very high - great as competition for tenders (especially by experienced parties with a proven track record) will be low. Presentation says competition is much larger companies who bid much higher prices.
4. Clients include the US & UK govts, aid agencies (eg UN), NGOs and corporates. High quality counterparts - credit risk managed.
5. Listed since June 2018, now have liquidity and structure which allows them to tender for bigger projects.
6. Significantly growing their order book: latest reported is now USD187m (latest in Feb 2019 was USD166m), up from USD119m previously. If they can start translating this into cashflow during 2021, I’d expect a fairly significant re-rate.
7. Targeting bigger, longer term contracts with services revenues.
8. Prior year PE is 7.8 (lifted from Stockopedia). Even my guess of, say, 11 is pretty low for a growing company with a cash pile an a decent contract pipeline.
9. Cash pile at 31 Dec 19, USD21m: I suspect that this will reduce by USD2-3m at this year end since FCF (i.e. after Capex) is likely to be marginally negative.
10. Dividend yield 2.9% more than four times covered. I wonder if they might cut it to conserve cash. Possible, but counter-argument is that it is easily manageable a virus-related problems (and thus cash drag) should resolve in coming months. And cutting the div looks terrible.
11. CFO bought over GBP60k's worth in Dec 2019.
Ctd...
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