Investors Chronicle ...target price 100p9 Oct 2020 15:27
Aim-traded Pelatro , a company that makes its money by providing telecoms operators with precision marketing software, has issued a bullish trading update at its annual meeting.
Annualised recurring revenue of US$4.7m is US$600,000 higher than when annual results were released in early April and two thirds higher than the 2019 run rate. This highlights the strength of demand for Pelatro’s software which handles and processes the data for more than 800m subscribers of its 19 telecom operator clients around the world.
Specifically, Pelatro uses 'big data' analytics to reveal patterns, trends, associations and behavioural traits of subscribers to enable telecom operators to monetise data to boost average revenue per user and increase their share of subscriber spend. Adopting a more customer centric approach to marketing also reduces churn rates.
Pelatro’s share price declined from the 70p level prior to the stock market crash. However, this is not a reflection of the operational performance as revenue visibility for 2020 backs up two thirds of Cenkos Securities' 2020 estimate of US$7.4m, up from US$6.7m in 2019, and the broker’s 2021 revenue estimate of US$9m doesn’t seem unreasonable given that Pelatro has a US$18m new business pipeline and is likely to see higher demand from existing contracted work, too.
The potential for Pelatro to double net profits next year as the operational leverage of the business model kicks in is significantly undervalued as the shares only trade on a 2021 price/earnings (PE) ratio of 10. My target price is 100p. Strong buy.