In an in-line AGM trading update, StatPro says that sales have progressed well and that the pipeline remains solid. We have maintained all of our forecasts, but see scope for upgrades as the year progresses, unless sterling continues its recovery. In April, StatPro said that it was acquiring UBS Delta, a portfolio analysis and risk management system, at a valuation of less than 0.8x revenues. The valuation compared with the c 7.3x sales that FactSet recently paid for BISAM, a key competitor of StatPro. We continue to see strong upside potential in the shares, if StatPro can successfully integrate UBS Delta, given the significant valuation disparity between StatPro and its US-listed financial software peers.
Written by
StatPro Group |
Q1 trading in line, focus on integrating UBS Delta |
AGM trading update |
Software & comp services |
22 May 2017 |
Share price performance
Business description
Next events
Analysts
StatPro Group is a research client of Edison Investment Research Limited |
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In an in-line AGM trading update, StatPro says that sales have progressed well and that the pipeline remains solid. We have maintained all of our forecasts, but see scope for upgrades as the year progresses, unless sterling continues its recovery. In April, StatPro said that it was acquiring UBS Delta, a portfolio analysis and risk management system, at a valuation of less than 0.8x revenues. The valuation compared with the c 7.3x sales that FactSet recently paid for BISAM, a key competitor of StatPro. We continue to see strong upside potential in the shares, if StatPro can successfully integrate UBS Delta, given the significant valuation disparity between StatPro and its US-listed financial software peers.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
30.2 |
2.6 |
2.6 |
2.9 |
47.2 |
2.3 |
12/16 |
37.5 |
2.7 |
3.5 |
2.9 |
35.5 |
2.3 |
12/17e |
48.9 |
4.2 |
5.0 |
2.9 |
25.0 |
2.3 |
12/18e |
57.3 |
6.1 |
7.2 |
2.9 |
17.2 |
2.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Trading update: A solid pipeline
In the trading update, StatPro says that “trading in the first quarter of the current financial year is in line with expectations. New sales of StatPro Revolution and StatPro Seven have progressed well and the pipeline for the remainder of the year remains solid”. Following the acquisition of UBS Delta, c 81% of annualised recurring software revenues now come from SaaS or cloud-based solutions with the balance from the group’s hosted StatPro Seven product. Carl Bacon is stepping down as chairman in November, after 17 years. Rory Curran will take on the role as chairman. Mr Curran joined the board as a non-executive director in May 2016.
Acquisition of UBS Delta has effectively completed
In April, StatPro said it was acquiring UBS Delta, an early-generation private cloud application used by front offices of institutional investors for portfolio management and marketing purposes, from UBS for c €13m. UBS Delta’s technology needs to be refreshed and to achieve this, its functionality, along with the customer base, will be transitioned to StatPro Revolution. The deal achieved its first closing date on 15 May, and now has effectively completed following the initial payment of €8.7m. The balance will be paid over the next three years. At the time of the acquisition, we noted that the deal significantly scales up StatPro’s business, boosting FY18 revenues by c 33%, adjusted EBITDA by c 40% and EPS by 40%.
Valuation: Highly scalable cloud computing upside
StatPro’s stock trades on c 25x our FY17e EPS, which falls to c 17x in FY18e. Alternatively, the shares trade on c 1.8x FY18e EV/sales, around one-third of the level of StatPro’s larger US peers and US-based pure SaaS companies. Our DCF model, when incorporating 10-year organic revenue growth of 4.4%, a terminal growth of 2%, a long-term margin target of 24.5% and a WACC of 9%, values the shares at 212p, 71% above the current share price.
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
32,486 |
32,018 |
30,187 |
37,545 |
48,948 |
57,304 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
32,486 |
32,018 |
30,187 |
37,545 |
48,948 |
57,304 |
||
EBITDA |
|
|
5,463 |
4,359 |
4,044 |
5,104 |
7,030 |
8,916 |
Adjusted Operating Profit |
|
|
4,327 |
2,875 |
2,852 |
3,461 |
5,230 |
7,116 |
Amortisation of acquired intangibles |
(402) |
(188) |
(32) |
(1,060) |
(1,060) |
(1,060) |
||
Exceptionals |
(347) |
0 |
0 |
(11,378) |
0 |
0 |
||
Share based payments |
(192) |
(26) |
(121) |
(361) |
(213) |
(225) |
||
Operating Profit |
3,386 |
2,661 |
2,699 |
(9,338) |
3,958 |
5,831 |
||
Net Interest |
(273) |
(291) |
(290) |
(786) |
(998) |
(1,021) |
||
Profit Before Tax (norm) |
|
|
4,054 |
2,584 |
2,562 |
2,675 |
4,232 |
6,095 |
Profit Before Tax (FRS 3) |
|
|
3,113 |
2,370 |
2,409 |
(10,124) |
2,960 |
4,810 |
Tax |
(1,030) |
(774) |
(788) |
(395) |
(889) |
(1,280) |
||
Profit After Tax (norm) |
3,024 |
1,810 |
1,774 |
2,843 |
3,344 |
4,815 |
||
Profit After Tax (FRS 3) |
2,083 |
1,596 |
1,621 |
(10,519) |
2,071 |
3,530 |
||
Minority interests |
0 |
0 |
0 |
(94) |
(121) |
(129) |
||
Net income (norm) |
3,024 |
1,810 |
1,774 |
2,280 |
3,223 |
4,686 |
||
Net income (statutory) |
2,083 |
1,596 |
1,621 |
(10,613) |
1,950 |
3,401 |
||
Average Number of Shares Outstanding (m) |
67.5 |
67.5 |
67.6 |
65.3 |
64.9 |
65.2 |
||
EPS - normalised (p) |
|
|
4.5 |
2.7 |
2.6 |
3.5 |
5.0 |
7.2 |
EPS - FRS 3 (p) |
|
|
3.1 |
2.4 |
2.4 |
(16.3) |
3.0 |
5.2 |
Dividend per share (p) |
2.80 |
2.90 |
2.90 |
2.90 |
2.90 |
2.90 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
16.8 |
13.6 |
13.4 |
13.6 |
14.4 |
15.6 |
||
Operating Margin (before GW & except.) (%) |
13.3 |
9.0 |
9.4 |
9.2 |
10.7 |
12.4 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
55,992 |
56,113 |
51,857 |
59,088 |
71,757 |
72,285 |
Intangible Assets |
53,524 |
52,546 |
48,613 |
55,696 |
68,452 |
68,774 |
||
Tangible Assets |
1,883 |
2,470 |
2,233 |
2,742 |
2,655 |
2,861 |
||
Other assets |
585 |
1,097 |
1,011 |
650 |
650 |
650 |
||
Current Assets |
|
|
10,312 |
10,441 |
10,665 |
19,081 |
24,018 |
28,637 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
6,167 |
7,722 |
8,462 |
14,725 |
19,197 |
22,475 |
||
Cash |
4,014 |
2,692 |
2,203 |
4,356 |
4,821 |
6,162 |
||
Current Liabilities |
|
|
(18,514) |
(20,271) |
(19,778) |
(35,686) |
(42,727) |
(47,207) |
Creditors |
(18,502) |
(20,259) |
(19,660) |
(27,227) |
(34,268) |
(38,748) |
||
Short term borrowings |
(12) |
(12) |
(118) |
(8,459) |
(8,459) |
(8,459) |
||
Long Term Liabilities |
|
|
(882) |
(598) |
(1,227) |
(9,897) |
(22,223) |
(21,523) |
Long term borrowings |
0 |
0 |
(801) |
(5,961) |
(16,060) |
(15,360) |
||
Other long term liabilities |
(882) |
(598) |
(426) |
(3,936) |
(6,163) |
(6,163) |
||
Net Assets |
|
|
46,908 |
45,685 |
41,517 |
32,586 |
30,826 |
32,191 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
9,403 |
7,705 |
6,548 |
7,454 |
11,604 |
14,417 |
Net Interest |
(98) |
(10) |
(84) |
(500) |
(998) |
(1,021) |
||
Tax |
(1,616) |
(1,173) |
(832) |
(1,294) |
(1,000) |
(846) |
||
Capex |
(4,412) |
(5,904) |
(4,999) |
(6,445) |
(6,486) |
(7,808) |
||
Acquisitions/disposals |
(990) |
0 |
0 |
(4,786) |
(10,861) |
(820) |
||
Equity financing |
0 |
2 |
64 |
(2,079) |
0 |
0 |
||
Dividends |
(1,856) |
(1,889) |
(1,960) |
(1,877) |
(1,893) |
(1,881) |
||
Net Cash Flow |
431 |
(1,269) |
(1,263) |
(9,527) |
(9,633) |
2,041 |
||
Opening net debt/(cash) |
|
|
(3,667) |
(4,002) |
(2,680) |
(1,283) |
10,065 |
19,698 |
Other |
(96) |
(53) |
(134) |
(1,821) |
() |
() |
||
Closing net debt/(cash) |
|
|
(4,002) |
(2,680) |
(1,283) |
10,065 |
19,698 |
17,657 |
Source: StatPro Group accounts, Edison Investment Research estimates
|
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