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Big data analytics for telecoms

Pelatro 7 February 2019 Update
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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

EDISON QUICKVIEWS ARE NORMALLY ONE OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

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1,185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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

General disclaimer and copyright

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.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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.

United States

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

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