nice forcast17 Apr 2013 10:34
1Spatial – at near Year Highs – still a buy?
By Tom Winnifrith — Wednesday 17 April 2013
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
AIM listed Tech stock 1Spatial (SPA) is on a share price roll. Those who followed my advice to buy the stock at 2p on 12th September owe me a tub of salted caramel ice cream as the shares are now at 8.875p valuing the company at a shade under £30 million. So what next?

Historically 1Spatial has done itself no favours by always having exceptionals and reorganisation costs running through its results. But looking through the red spaghetti this is a company in cracking shape. This will be clear in the results to January 31st 2013 which will be out some time in May or June.

My forecast is that for the year ended the company will report underlying EBITDA of c£2million and to end the year with net cash of £4 million. But we are now well into this year and that is when the really big contracts secured in recent months by the 1Spatial unit should kick in. I would also expect the non-core Storage Fusion unit ( which now looks set not to be sold) to start delivering profits and as such I am increasing my forecast of pre-tax profits, following a bit of digging, to £3.,25 million ( from £3 million) and that will be on a zero cash charge. Net cash at this year-end will be c£5 million.

And so what valuation is fair? I would suggest that net cash plus a PE of 12 is far from undemanding given the strong growth being delivered. If the market cap gets to £40 million then institutional buying starts to kick in and a PE of 15 is probably more than deliverable. On my lower ratings multiple the target is thus £44 million or 13.2p per share. On my higher multiple target the target is thus £53.75 million or 16.125p. 

At a spread of 8.75p-9p I would suggest that 1Spatial is an attractive purchase.
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