GE&CR Coverage1 Oct 2010 13:31
1Spatial ended its financial year to 30th June 2010 with net cash of £0.481 million and sales and profits of £8.008 million and £0.073 million respectively. 1Spatial's strong management team has refocused the group's sales and marketing effort to capitalise upon the increasing numbers of geospatial opportunities that continue to emerge for this large ($2.65 billion market) and fast growing market (CAGR 38.4% 2006 – 2010).
1Spatial has net cash and is operationally geared and are confident, subject to there not being a double dip recession, that sales and, therefore, pre-tax profit and earnings per share expectations are deliverable.
Valuing the group on an EV/EBITDA basis. Therefore, with the 'consolidated' shares trading at 0.05p on the enlarged issued share capital, the market capitalisation is £10.603 million but the Enterprise Value is £10.122 million, which is 9.51 times reported 2010 EBITDA of £1.065 million. However it's estimated that by the end of the financial year to 30 June 2012, the group will have increased net cash from £0.481 million to £4.182 million, which opens up the potential of the group paying a dividend as early as next year. Despite the increase in net cash, were the shares trade on the same EV/EBITDA multiple of 9.51 times, then, based on our 2012 forecasts, the shares should trade at 0.123p and with the shares trading at 0.05p, they initiate coverage with a recommendation of buy.