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Research: TMT
1Spatial has announced a two-year contract to build a data verification gateway with High Speed Two (HS2). The deal is worth £0.9m over two years, the majority of which is likely to be a recurring software licence/subscription, with options to extend for a further two years beyond that. The deal provides support for our current estimates, but also highlights the company’s increasingly interesting strategic position as the go-to supplier of location master data management solutions in both the UK and United States. The company’s potential to deliver strong, scalable growth continues to strengthen. We do not believe that the company’s current valuation (EV/sales 1.9x) reflects this potential.
1Spatial |
On board with HS2 |
Contract win |
Technology |
8 June 2022 |
Share price performance Business description
Analysts
1Spatial is a research client of Edison Investment Research Limited |
1Spatial has announced a two-year contract to build a data verification gateway with High Speed Two (HS2). The deal is worth £0.9m over two years, the majority of which is likely to be a recurring software licence/subscription, with options to extend for a further two years beyond that. The deal provides support for our current estimates, but also highlights the company’s increasingly interesting strategic position as the go-to supplier of location master data management solutions in both the UK and United States. The company’s potential to deliver strong, scalable growth continues to strengthen. We do not believe that the company’s current valuation (EV/sales 1.9x) reflects this potential.
Year end |
Revenue |
EBITDA* (£m) |
EBIT* |
EPS* |
P/sales |
EV/EBITDA (x) |
P/E |
01/21 |
24.6 |
3.6 |
0.4 |
0.2 |
2.3 |
14.8 |
251.5 |
01/22 |
27.0 |
4.2 |
1.3 |
0.8 |
2.1 |
12.9 |
62.9 |
01/23e |
29.0 |
4.9 |
2.0 |
1.2 |
2.0 |
11.0 |
41.9 |
Note: *EBITDA, EBIT and EPS exclude amortisation of acquired intangibles, exceptional items and share-based payments.
1Spatial’s solution for HS2 will comprise a web portal for data uploading, underpinned by 1Integrate to check the compliance and quality of the data. It is likely therefore that the deal will comprise an element of non-recurring configuration services with a healthy recurring software licence or subscription component.
Interestingly, the deal was a direct award via G-Cloud 12, the government’s procurement portal for cloud-based computing services. This helps reinforce our view that 1Spatial has a highly differentiated product in 1Integrate and is now the go-to supplier of location data management solutions.
While we are not altering our estimates at this stage, we believe that 1Spatial’s platform for delivering robust, scalable growth continues to strengthen. The company is positioned at the intersection of two large, high-growth markets in geospatial and master data management, and continues to win flagship clients in both the UK and United States. The company is making good progress in migrating its revenue mix towards repeatable or recurring software sales, while progress in the United States, the introduction of SaaS products and the further development of a partnership sales model should further support operationally geared growth. We do not believe that the company’s current rating of 1.9x EV/sales reflects the company’s growth and margin expansion potential.
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