Covata has raised A$2m from institutional and retail investors, bolstering its cash position. The company is making progress with the development of its data security platform, and plans to launch a beta version by the end of the current quarter. New customer contracts have been signed for SafeShare and CipherPoint and the company has a growing sales pipeline.
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17 January 2018 |
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Covata is a research client of Edison Investment Research Limited |
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Covata has raised A$2m from institutional and retail investors, bolstering its cash position. The company is making progress with the development of its data security platform, and plans to launch a beta version by the end of the current quarter. New customer contracts have been signed for SafeShare and CipherPoint and the company has a growing sales pipeline.
Funds raised
The fund-raising announced by Covata in October raised A$425k via an institutional placing (9.0m shares at 4.7c per share) and A$1.637m via a retail offering (34.8m shares at 4.7c per share). Covata had net cash of A$4.5m at the end of Q118; in Q218, it expects a total cash outflow of A$2m (before revenues and interest income) and an R&D tax credit receipt of A$1.5m. Based on these numbers, Covata should have a net cash position of at least A$6.0m by the end of Q218.
Making progress with platform and contract wins
Covata expects to launch the beta version of its DSP platform, CovataSecure 1.0, by the end of Q218. It recently made SafeShare available on Microsoft’s Azure cloud platform and has since signed up a new customer to use SafeShare via Azure on a three-year subscription. The Macquarie Telecom partnership agreement has been renegotiated – with 23 government departments using SafeShare via this agreement, we anticipate a positive impact on revenues from Q218.
CipherPoint contribution
The acquisition of US data security software company, CipherPoint, completed on 25 August. Covata’s Q218 cash outflow forecast includes the CipherPoint cost base, and at the AGM management confirmed that it had generated revenues of US$142k since acquisition. Earnout payments are based on CipherPoint generating revenues of at least US$300k in H118 and US$500k in FY18. In October the company announced that a US franchised sporting association had signed up for a CipherPoint Eclipse perpetual licence plus annual maintenance.
Tracking the milestones
There are no forecasts available; to track progress we would look to monitor contract wins, user numbers and cash burn and, in the longer term, progress towards completing the DSP. The company has confirmed that it will shortly start reporting certain KPIs (customer and user numbers) and, in the longer term, will report additional SaaS-type metrics including churn and recurring revenues.
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Source: Covata |
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Research: Industrials
Following recent corporate events, we believe the market is familiar with the paragon growth story. Based on 9M17 results, both paragon and its 60%-owned subsidiary Voltabox are on track to achieve management’s FY17 guidance. Adjusting for Voltabox, paragon’s implied FY17e EV/sales multiple of 0.93x for the electronics and mechanics segments is comparable to peers. Our revenue and earnings estimates are largely unchanged and broadly in line with consensus as we wait for more details on the potential entrance to the autonomous driving market. We have adjusted our DCF valuation from €82.1/share to €86.4/share mainly to reflect the recently completed IPO of Voltabox.