RE: Digesting the Interim Results3 Dec 2014 09:50
Digesting the Trading Update:
Good bits
9 month revenue of £7.6m means that revenue per month is accelerating. Let me explain by looking at the average revenue per month:
Q1: £2m / 3 = £0.66m per month
Q2: HY minus Q1 figure = (£4.59 - £2m) / 6 = £0.86m per month
July & August: £0.98m per month
September revenue: £1.16m
On this basis, and then taking a conservative view, FY revenue should be £10.6m - £11m (against £4.7m last year). If 21% of that falls to the bottom line (like it did last year), we can expect profit before tax to be £2.2m - £2.3m (against £0.1m or £0.57m last year).
The launch in Myanmar sounds like another superb move. Additionally the list of companies working with SyQic is growing and this bodes well – it shows confidence in SyQic’s offering.
PTNP continue to adhere to the previously agreed payment plan for 2012 & 2013 – good!
Bad bit
It seems as though PTNP are being slow in paying SyQic what it owes for the current year. They were doing very well over the summer about this, but now it seems as though that – come year end – it will have only have paid for January, February, March and April. What about the other months??
Conclusion
SyQic’s brokers, Allenby Capital, predicted the company’s performance very accurately for the 2013 year and, based on their 2014 predictions they said SyQic’s fair value was 130p. However that was back when they predicted FY 2014 revenue would be £7.8m, which now looks very conservative since FY revenue will be 35%- 40% above that.
SyQic has continued outperform my own expectations. I hoped for £7.8m initially, then thought it would be £9.2m following the interims, and now I’m expecting it to be about £11m. If the company hit my initial expectations that would have shown superb growth, but the company has continued to perform EVEN better still. I’m absolutely blown away by SYQ’s 2014 performance.
The company does have cash flow problems thanks to the PTNP Telco BUT
1) the situation is clearly improving (even if it’s not at the pace I’d like), and
2) the company’s change of business model is making it less reliant / susceptible to similar problems going forward.
It is therefore inevitable that SYQ will be cashflow positive in the future and, on that basis, SYQ couldn’t be a better investment with a short to medium term view.
I reiterate my Strong Buy recommendation (and it's actually a stronger buy now than it was before)
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