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Research: TMT
1Spatial’s agreement with the State of Michigan Department of Technology shows further evidence that the company is making progress in the key US market and that the recovery plan is on track. As a state level agreement, it is also strategically interesting in that it can potentially open doors to other agencies which feed into the programme.
Written by
1Spatial |
Progress in the US |
Deal flow |
Software & computer services |
11 January 2018 |
Share price performance
Business description
Analysts
1Spatial is a research client of Edison Investment Research Limited |
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1Spatial’s agreement with the State of Michigan Department of Technology shows further evidence that the company is making progress in the key US market and that the recovery plan is on track. As a state level agreement, it is also strategically interesting in that it can potentially open doors to other agencies which feed into the programme.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
EV/Sales (x) |
P/E |
01/16 |
18.3 |
1.1 |
0.16 |
0.0 |
1.6 |
25 |
01/17 |
22.1 |
(2.4) |
(0.33) |
0.0 |
1.4 |
N/A |
01/18e |
23.8 |
(0.6) |
(0.08) |
0.0 |
1.3 |
N/A |
01/19e |
25.6 |
(0.2) |
(0.03) |
0.0 |
1.2 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments
The agreement is to provide software and services as part of the Michigan Geographic Framework (MGF), an initiative aimed at creating and maintaining a single ‘official’ base map for state business needs. It will be provided through a subcontract with ESRI, the world’s largest GIS software business, with whom 1Spatial has had a partnership since 2014. While the ESRI partnership has not delivered the volume of deals initially anticipated, it shows that this channel is still very much live despite the company’s investment back into its direct sales capability.
The deal is worth a total of $766k of which $361k is for services ($86k has been delivered already) while the licence fee is $405,000, split into five annual instalments. Consequently, it is unlikely to make a significant contribution to the P&L for the year to 31 January 2018. Nevertheless, we remain comfortable with our estimates and the deal gives us encouragement that 1Spatial is on track with its recovery plan.
We retain our view that with good execution, 1Spatial has the ingredients to deliver meaningful upside. The GIS market is large ($9bn according to P&S Market Research) and growing at a double-digit rate, while 1Spatial’s customer base, technology and expertise give the business a good platform to expand.
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Disclaimer
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Disclaimer
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Circle Property’s recent interim results show asset management initiatives continuing to drive operational progress, delivering strong growth in rental income and cash earnings, and lifting portfolio valuations. Letting progress has continued in H218, including at recently refurbished assets, but significant reversionary potential remains and capital values remain low. We are raising our estimates again but continue to see potential for further upside from faster letting of refurbished assets than we have assumed. Even before that, the shares trade at a hefty 25% discount to FY18e NAV with a yield of more than 3%.