Tipped by Simon Thompson today7 May 2019 14:37
Https://www.investorschronicle.co.uk/comment/2019/05/07/bargain-shares-small-cap-buying-opportunities/
"Profiting from cyber crime
Kape Technologies (KAPE:91p), a provider of cyber security software and a constituent of my 2017 Bargain Shares portfolio when the shares were priced at 47.9p, has issued a bullish trading update at today’s annual meeting and one that vindicates the bullish investment case I outlined when I covered the 2018 annual results (‘Profiting from cyber security', 20 March 2019).
Kape continues to pull in new subscribers, driven by the acquisition in March 2017 of CyberGhost, a leading cyber security SaaS (software as a service) provider of secure virtual private networks (VPNs), which enable users to securely pass data over public networks. As digital privacy awareness has become mainstream due to the escalation of cyber crime targeting consumers’ data, then demand for encrypted data has soared, so much so that by the end of last year CyberGhost’s customer base had almost trebled to more than 400,000 since acquisition. The growth is showing no signs of slowing either. That’s hardly surprising given that the global cyber security market is now worth $153bn (£117bn) and is growing at 12 to 15 per cent per year.
In fact, Kape reported today that both last autumn’s acquisition, Berlin-based Zenmate – a digital privacy company that is also focused on encrypting and securing internet connections and protecting individuals' privacy and digital data through VPNs – and CyberGhost have grown their respective subscriber bases by 65 per cent year on year in the first quarter of 2019, so propelling Kape’s SaaS subscriber base by 14 per cent to 945,000.
After factoring in organic growth and the contribution from last summer’s acquisition of Intego, a Mac and iOS cyber security and malware protection SaaS business, Kape is on track to deliver a near-50 per cent hike in 2019 annual revenues to $77.3m as house broker Shore Capital predicts. On this basis, expect a 43 per cent rise in full-year pre-tax profit to $12.6m to lift underlying EPS from 5¢ to 6.8¢ (5.2p). Moreover, the company is cashed up to make further earnings-accretive acquisitions, having ended 2018 with net funds of $40.4m, a sum worth 21.5p a share. This means that Kape’s shares are rated on a cash-adjusted forward PE ratio of 13, hardly punchy for a business operating in a high-growth market, and one that is benefiting from increasing market penetration as consumers adopt the technology to protect themselves against cyber crime. Buy."
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