Member Info for jange

50% spread crazy.......

crazy spread......

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Business description Lo-Q provides technology solutions to the leisure and attractions industry. Its solutions include payment, ticketing, queue line management and digital content.

Valuation: Stable earnings base with a range of growth prospects The stock trades on 26x our FY13 earnings, falling to 24x in FY14 and to 20x in FY15. Our DCF model (which assumes a WACC of 10%) values the shares at 468p, or 6% above the current share price. In our view, this valuation is underpinned by the group’s record of cash generation, its largely recurring revenue streams, its long-term relationship with Six Flags, its growing business with other major park operators and the potential to leverage accesso’s business outside the US. We see significant further upside potential from a stronger sales focus and growth opportunities in adjacent markets.

Sensitivities: Strength of the intellectual property Virtual queuing is potentially sensitive to an economic slowdown as a weak economic backdrop might shorten the lengths of queues and reduce the requirement for priority systems. Theme and water parks have short seasons; if interrupted by poor weather, or other factors, our forecasts could be affected. A significant proportion of revenues are concentrated through Six Flags, a large US theme park chain. Technological developments such as mobile phone apps could pose a threat, although the combination with accesso arguably strengthens Lo-Q’s competitive position, and the group continues to invest in its patent portfolio covering wireless devices, including mobile phones, and virtual queuing.

Financials: Lucrative revenue-sharing and transaction-based models Lo-Q’s traditional virtual queuing business generates its income through revenue-sharing arrangements with park and attractions operators, while its ticketing and payments solutions operate transaction-based business models. The group has been profitable since FY06, generated positive operating cash flow since FY07 and positive free cash flows since FY08. On our forecasts, the group will generate free cash flow of £1.5m in FY13, rising to £2.7m in FY14 and to £4.0m in FY15 and we forecast net cash to rise to £2.6m as at 31 October 2013, rising to £5.3m by October 2014 and £9.4m a year later.

Company description: Queuing and e-commerce solutions Lo-Q is a technology provider to operators of theme parks and other attractions. Its products cover electronic virtual queuing, reservation and guest service systems along with cloud-computing-based ticketing and e-commerce solutions tailored for onsite, the internet and mobile phones. The group has c 105 full-time employees working in operations, R&D, sales and administration, along with c 850 seasonal employees, who work in parks. The head office and European support teams are based in Twyford, Berkshire, in the UK and the group has US offices in Lithia Springs, Georgia, and in Lake Mary, Florida, to support its North American customer base. R&D teams are in Twyford and Lake Mary.

. Forecast and valuation: Attractive given the prospects We are easing our FY13 and FY14 revenue forecasts, modelling in a higher mix of higher-margin “proportionate rental” revenues. Our adjusted operating profit remains at similar levels, while EPS rises to 16.7p and 18.4p from 16.3p and 17.6p respectively. While the shares trade on a punchy rating of c 26x our FY13 earnings falling to c 24x in FY14, the group has established an excellent track record and has plenty of momentum along with a clear strategy in place to sustain its growth.