StatPro Group
Written by
StatPro Group |
Deal boosts cloud revenue run rate to 35% |
Acquisition |
Software & comp services |
25 January 2016 |
Share price performance
Business description
Next events
Analysts
StatPro Group is a research client of Edison Investment Research Limited |
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StatPro has acquired Investor Analytics (IA), a US-based provider of cloud-based risk analytics solutions to hedge funds and asset managers, for up to $16m. IA’s Risk Factor and Monte Carlo models will enable StatPro to provide a broader set of risk models to its customers. The deal boosts the group’s cloud-based annualised recurring revenue run rate to 35% of the total revenue book, up from 27%, and strengthens the group presence in the important North American market (IA’s HQ is in New York). We continue to believe there is significant upside in the shares, given the lofty multiples of StatPro’s US-based financial software peers and SaaS companies.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
32.5 |
4.1 |
4.5 |
2.8 |
16.3 |
3.8 |
12/14 |
32.0 |
2.6 |
2.7 |
2.9 |
27.2 |
3.9 |
12/15e |
31.3 |
2.3 |
2.4 |
2.9 |
30.6 |
3.9 |
12/16e |
32.7 |
2.6 |
2.8 |
2.9 |
26.3 |
3.9 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Acquisition of Investor Analytics
StatPro is paying an initial $7m in cash, with a further $3m in deferred payments. This represents 2.0x FY15e revenues, which in our view looks attractive in relation to both the asset management software sector and SaaS business model valuations. In the 12 months to December 2015 IA generated $5m of revenues, of which 94% are recurring in nature. A further $6m is payable after one year, dependent on securing a number of new contract wins. We understand that IA’s small size was limiting its ability to expand the business, and becoming part of StatPro should resolve this issue. IA will be integrated into the StatPro Revolution platform, and StatPro anticipates that its existing equity focused asset management clients will wish to subscribe for the additional functionality. Further, we believe that IAs existing 53 clients, which are all new clients for StatPro, could be interested in Revolution’s Performance and Attribution features. IA generated an EBITDA loss of c $0.3m in FY15. However, StatPro believes it can achieve annualised cost synergies (including data feeds and administration services) of c £0.7m, and is therefore targeting EBITDA or £0.35-0.5m in the first 12 months after the acquisition. Exceptional cash charges of £0.7-1.0m are expected to be made, covering transaction fees and other one-off costs. StatPro has a small net cash position and so the transaction is being financed through its debt facility with Wells Fargo, which has been increased to c £24.5m, £17.0m of which is committed.
Valuation: Highly scalable cloud computing upside
We will incorporate the acquisition into our financial forecasts after the forthcoming trading update. StatPro’s stock trades on c 31x our FY15e EPS, which falls to c 26x in FY16e (pre-deal). Alternatively, the shares trade on an c 1.6x FY16e EV/sales (we estimate c 1.7x on post-acquisition basis), one-third of the level of its larger US peers, which typically trade above 4.8x EV/sales, while US-based pure SaaS companies typically trade in the region of 4.0-6.4x EV/sales.
Exhibit 1: Financial summary
£'000s |
2011 |
2012 |
2013 |
2014 |
2015e |
2016e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
31,715 |
32,001 |
32,486 |
32,018 |
31,315 |
32,743 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
31,715 |
32,001 |
32,486 |
32,018 |
31,315 |
32,743 |
||
EBITDA |
|
|
6,118 |
6,728 |
5,463 |
4,359 |
3,953 |
4,601 |
Adjusted Operating Profit |
|
|
5,056 |
5,534 |
4,327 |
2,875 |
2,551 |
2,846 |
Amortisation of acquired intangibles |
(447) |
(440) |
(402) |
(188) |
(32) |
0 |
||
Exceptionals |
0 |
(693) |
(347) |
0 |
0 |
0 |
||
Share based payments |
(119) |
159 |
(192) |
(26) |
(188) |
(200) |
||
Operating Profit |
4,490 |
4,560 |
3,386 |
2,661 |
2,331 |
2,646 |
||
Net Interest |
(627) |
(493) |
(273) |
(291) |
(300) |
(200) |
||
Profit Before Tax (norm) |
|
|
4,429 |
5,041 |
4,054 |
2,584 |
2,251 |
2,646 |
Profit Before Tax (FRS 3) |
|
|
3,863 |
4,067 |
3,113 |
2,370 |
2,031 |
2,446 |
Tax |
(955) |
(1,387) |
(1,030) |
(774) |
(630) |
(741) |
||
Profit After Tax (norm) |
3,474 |
3,654 |
3,024 |
1,810 |
1,621 |
1,905 |
||
Profit After Tax (FRS 3) |
2,908 |
2,680 |
2,083 |
1,596 |
1,401 |
1,705 |
||
Average Number of Shares Outstanding (m) |
60.8 |
62.2 |
67.5 |
67.5 |
67.6 |
67.9 |
||
EPS - normalised (p) |
|
|
5.7 |
5.9 |
4.5 |
2.7 |
2.4 |
2.8 |
EPS - FRS 3 (p) |
|
|
4.8 |
4.3 |
3.1 |
2.4 |
2.1 |
2.5 |
Dividend per share (p) |
2.60 |
2.70 |
2.80 |
2.90 |
2.90 |
2.90 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
19.3 |
21.0 |
16.8 |
13.6 |
12.6 |
14.1 |
||
Operating Margin (before GW and except.) (%) |
15.9 |
17.3 |
13.3 |
9.0 |
8.1 |
8.7 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
62,315 |
60,272 |
55,992 |
56,113 |
56,688 |
56,633 |
Intangible Assets |
59,045 |
57,683 |
53,524 |
52,546 |
52,488 |
52,550 |
||
Tangible Assets |
2,390 |
1,974 |
1,883 |
2,470 |
3,103 |
2,986 |
||
Other assets |
880 |
615 |
585 |
1,097 |
1,097 |
1,097 |
||
Current Assets |
|
|
8,794 |
10,675 |
10,312 |
10,441 |
8,884 |
9,688 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
6,173 |
6,962 |
6,167 |
7,722 |
7,553 |
7,897 |
||
Cash |
2,447 |
3,681 |
4,014 |
2,692 |
1,304 |
1,764 |
||
Current Liabilities |
|
|
(19,445) |
(19,927) |
(18,514) |
(20,271) |
(20,866) |
(21,575) |
Creditors |
(19,434) |
(19,913) |
(18,502) |
(20,259) |
(20,854) |
(21,563) |
||
Short term borrowings |
(11) |
(14) |
(12) |
(12) |
(12) |
(12) |
||
Long Term Liabilities |
|
|
(7,834) |
(1,400) |
(882) |
(598) |
(598) |
(598) |
Long term borrowings |
(5,835) |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(1,999) |
(1,400) |
(882) |
(598) |
(598) |
(598) |
||
Net Assets |
|
|
43,830 |
49,620 |
46,908 |
45,685 |
44,107 |
44,148 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
9,925 |
9,233 |
9,403 |
7,705 |
8,168 |
8,426 |
Net Interest |
(423) |
(306) |
(98) |
(10) |
(300) |
(200) |
||
Tax |
(844) |
(1,261) |
(1,616) |
(1,173) |
(1,128) |
(608) |
||
Capex |
(4,785) |
(4,187) |
(4,412) |
(5,904) |
(5,441) |
(5,198) |
||
Acquisitions/disposals |
0 |
0 |
(990) |
0 |
(730) |
0 |
||
Equity financing |
(12) |
5,689 |
0 |
2 |
0 |
0 |
||
Dividends |
(1,502) |
(1,627) |
(1,856) |
(1,889) |
(1,957) |
(1,961) |
||
Net Cash Flow |
2,359 |
7,541 |
431 |
(1,269) |
(1,388) |
459 |
||
Opening net debt/(cash) |
|
|
5,523 |
3,399 |
(3,667) |
(4,002) |
(2,680) |
(1,292) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(235) |
(475) |
(96) |
(53) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
3,399 |
(3,667) |
(4,002) |
(2,680) |
(1,292) |
(1,752) |
Source: Company accounts, Edison Investment Research estimates.
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