RE: Terrific H1 results - and tipped by Simon Thompson21 Sep 2021 13:33
Progressive Equity Research have issued a new note today:
Https://www.progressive-research.com/research/taking-the-express-path-to-global-leadership/
They've upgraded 2022E revenues "by some 146%, with Adjusted EBITDA up 84% from $91.0 million to $167.7 million."
With 41c EPS now forecast next year, KAPE's P/E remains extremely good value imho.
This section is noteworthy:
"What’s in it for ExpressVPN ?
Kape has, for many years, been expanding through both acquisition and organic delivery.This ExpressVPN deal is, by some margin, the largest deal in Kape’s history. The attraction for Kape is clear – and we understand that the attraction for ExpressVPN is related to Kape’s existing and historic success.
? Both companies have been highly successful at executing on their growth strategies, both (especially PIA within Kape) already benefit from the flexibility of a largely-remote workforce, and both use offshore delivery (in the Philippines) for customer support.
? Crucially, Kape already provides a multi-product offering and platform, which could be quickly brought to bear on the large ExpressVPN customer base (and through its strong distribution network). This should allow for an expansion of the ARPU achieved by both businesses, and for further organic growth over time.
? We understand that, through a combination of these factors, as well as a clear cultural alignment, Kape was able to persuade the ExpressVPN founders and shareholders that a combination was the logical move.
It is perhaps for these reasons that Kape has been able to negotiate what appears to be a very good price – paying a low-double digit EBITDA multiple for a business with genuine global scale, with a very attractive historic growth profile and with significant ongoing market opportunity.
Summary and conclusion
This deal is clearly a very major step for Kape. The group is becoming a material player on the world stage for personal security and privacy. The move is not without risk – the consideration is partly deferred but fixed, and the sums payable are considerable. Nevertheless, the expansion in the group’s scale and the opportunity for cross-sell and up-sell, as well as logical cost reductions, should allow the business to easily fund the deferred element of the consideration and benefit in terms of strong cash flows and the ability to reinvest in products, as well as providing a good long-term opportunity for investors.
We take additional comfort from today’s strong H1 delivery, and look forward to further announcements as the transaction moves through the antitrust procedures and towards completion. We may need to adjust our forecasts again, once deal timing is clearer and as additional detail is available, but in the meantime we take comfort from the ongoing expansion in the digital security market and Kape’s clear ambition to expand and extend its role in the market."
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