Pelatro — Big data analytics for telecoms

Pelatro — Big data analytics for telecoms

Pelatro’s demonstration of its mViva marketing platform at a recent capital markets day revealed the scope of its big data analytics capabilities and interactive user interface. Ease of use by non-technical staff and the ability to quickly launch and analyse complex marketing initiatives are key differentiators. With its focus on client retention and revenue stimulation, which are now of vital importance to the stagnant telecom sector, its client base is growing fast. In 2018 it rose by eight to 14 clients including Telenor, Tele2 and SingTel. Pelatro trades at a significant discount to its peers on a 2018e EV/EBITDA of 9.2x.

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Written by

Pelatro

Big data analytics for telecoms

IT & managed services

QuickView

7 February 2019

Price

82p

Market cap

£27m

$1=£0.77

Share price graph

Share details

Code

PTRO

Listing

AIM

Shares in issue

32.53m

Business description

Pelatro provides telecoms operators with platform-based precision marketing software. The suite of tools on the mViva-brand platform include contextual marketing, loyalty management, data monetisation and gamification. They also enable non-technical staff to create and analyse complex multi-channel marketing campaigns. mViva also supports customer-facing staff with real-time client profile and actionable ideas. It listed on AIM in 2017.

Bull

High degree of specialisation and platform utility should aid penetration of the telecom sector in the face of largely generic competition.

Significant scope for growth with 300+ potential telecom clients; the CEM market’s CAGR is forecast at 22.9% to 2025 (Grand View Research).

Attractive valuation multiples, and $1.6m net cash.

.

Bear

The bulk of current revenues are still one-off from initial platform sales plus platform tailoring charges.

Small player competing in a sector dominated by large operators.

Business oriented to a single sector.

Analysts

Anna Bossong

+44 (0)20 3077 5737

Russell Pointen

+44 (0)20 3077 5700

Pelatro’s demonstration of its mViva marketing platform at a recent capital markets day revealed the scope of its big data analytics capabilities and interactive user interface. Ease of use by non-technical staff and the ability to quickly launch and analyse complex marketing initiatives are key differentiators. With its focus on client retention and revenue stimulation, which are now of vital importance to the stagnant telecom sector, its client base is growing fast. In 2018 it rose by eight to 14 clients including Telenor, Tele2 and SingTel. Pelatro trades at a significant discount to its peers on a 2018e EV/EBITDA of 9.2x.

Gartner rated ‘competitive vendor’

Pelatro’s mViva solution contains a range of tools including contextual marketing, revenue-boosting gamification and loyalty management as well as interfaces for customer-facing staff with analytics based ‘best offers’. Positively, Gartner rates Pelatro as a competitive vendor in multichannel campaign management based on its ‘ability to execute and its completeness of vision’. While a managed services model is planned, the bulk of current revenues are one-off perpetual licence fees, ring-fenced to client customer numbers, plus change requests.

Building scale to benefit from operational gearing

With a highly scalable product, Pelatro is focused on building its customer base, cross-selling and winning local/going global. A good example occurred in 2018 when PLTRO acquired a global framework agreement with Telenor for a contextual marketing platform and was able to add a loyalty management solution two months later. With the pace and quality of client gains, Pelatro’s existing $4m order backlog and $15m sales pipeline, we see Pelatro as well positioned to achieve FY19e revenue and EBITDA consensus.

Valuation: Strong growth prospects and net cash

Pelatro trades on a prospective FY1 EV/sales of 5.5x, which is a 12% premium compared to the sector median of 4.9x, and an EV/EBITDA of 9.2x, which is a 77% discount to the sector median. We expect market share gains among the world’s 360+ telecoms enterprises and a forecast 22.9% CAGR in the customer experience management (CEM) market to 2025 (Grand View Research) to provide a strong environment for rapid growth in recurring managed services revenues. Helped by strong operating leverage, this should support ongoing earnings growth. Pelatro offers strong growth prospects and a net cash positive balance sheet at attractive multiples.

Consensus estimates

Year
end

Revenue
($m)

EBITDA
($m)

PBT
($m)

EPS
(c)

DPS
(c)

EV/EBITDA
(x)

P/E
(x)

12/16

1.2

0.5

0.4

1.9

0.0

66.0

56.0

12/17

3.1

2.0

1.8

6.6

0.0

16.5

16.1

12/18e

6.0

3.6

2.9

9.0

0.0

9.2

11.8

12/19e

10.5

7.0

6.0

15.0

0.0

4.7

7.1

Source: Refinitiv

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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This report has been prepared and issued by Edison. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: Financials

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