Arcontech Share Discussion Threads

[petewy] 25/2/2024 12:44

Cavendish note is thorough
hxxps://www.research-tree.com/dashboard/PortalDownloadResearchNote?id=129_6b9eaf2b-eba6-4886-adbc-840460ce6619&token=1d3dde44-f797-44d4-ade1-4fb9eec5fbf0&partner=&whitelabelCompanyId=

[robow] 22/2/2024 09:46

thanks value hound

[value hound] 22/2/2024 07:44

Re-tipped by Simon Thompson under the title:

"Earnings upgraded by 44% – but there's more to come from this stock"

He concludes with....

"The cash pile not only offers firepower for Arcontech to make complementary earnings-accretive acquisitions, such as a trading platform which could be integrated into its solutions, but the cashed-up company could itself become prey to a larger predator. Shareholders can expect another hike in the progressive dividend, too, with Hill pencilling in a full-year payout per share of 3.7p.

"Arcontech’s share price is modestly up since I suggested buying the shares at the annual results (‘Larger predators will soon notice Arcontech's smart strategy’, 6 September 2023) and offers almost 100 per cent upside to Cavendish’s target price of 180p. Buy."

[boadicea] 21/2/2024 09:19

This is looking rather cheap, although slightly less so if a 'normal' tax charge were applied. However a couple of decent contracts on a fairly fixed overhead would soon make it a real bargain. Worth hanging on to imho and waiting for next news.

[value hound] 21/2/2024 08:45

Indeed! I keep thinking this will get sold st some point, but if so at what price ?

I imagine Simon Thompson will write this up later.

[vegpatch] 21/2/2024 07:40

Mkt cap £12m
Net cash c£6m
Made £500k in h1. 100% recurring revs
Recent trading has been difficult with customer losses and a management team nervous to raise prices but management confident revenues starting to inflect upwards.
PE 8x
What would you pay for a FCF yield of 12% growing at say even 5% ?

[value hound] 21/2/2024 07:12

All good, but still no news re any big bank or investment house gobbling it up.

[vaston] 08/2/2024 09:54

SYME IS NOW READY TO FLY

[value hound] 27/10/2023 07:22

A rare ray of sunshine this morning.

A multi-year agreement, with the initial deployment in New York, marks the start of an important relationship with a Tier 1 global institution that should see expansion to Europe and Asia.

[value hound] 06/9/2023 16:56

Re-tipped by Simon Thompson under the heading: Larger predators will soon notice Arcontech's smart strategy.

His conclusion:

Although analyst Michael Hill at brokerage FinnCap is conservatively pencilling in a modest £60,000 increase in current-year revenue to £2.8mn, he points out that several of the contracts in Arcontech’s pipeline could exceed that entire uplift if secured, as seems increasingly likely. That’s worth noting given that he has factored in £0.4mn higher operating expenses into his forecasts for the new financial year to reflect investment made in new staff hires across the salesforce and development and support team. The increase in overheads will prove a drag on profits unless the contracts are landed, but equally the investment made is markedly increasing the business opportunity, too, a point that will not have gone unnoticed with larger predators. Buy.

[trident5] 05/9/2023 20:28

No apology needed.
It's not just me making the effort, but all readers and Finncap are in the communication business. Just very second rate.

[value hound] 05/9/2023 18:05

Perhaps a table would have saved everybody wading through all that

So sorry you had to go to all that effort.

[vegpatch] 05/9/2023 16:20

@Moathunter. I would have though the same regarding high switching costs and ability to raise prices, although Matthew Jeffs, CEO, clearly is nervous about the solidity of contracts which is why he has agreed well below inflation increases on multi year contracts, despite having escalator clauses in the contracts (just ask him). Reminds me of the Buffettism "If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you've got a terrible business. I've been in both, and I know the difference." I am v disappointed in the faith he has in the product set.

[trident5] 05/9/2023 14:21

Perhaps a table would have saved everybody wading through all that.

And why oh why do they have to reference adjusted EBITDA, particularly in a company like this - no debt and little Capex.

[value hound] 05/9/2023 12:50

Finncap note:

Arcontech has reported encouraging FY23 results to June, with revenue of £2.7m, adj EBIT of £0.8m and net cash of £6.4m, and we upgrade FY24 net cash +3% to £6.8m while revising our adjusted EBIT. FY23 revenue of £2.7m is in line with expectations and 100% recurring, and reflects the strengthening relationships with the core tier 1 customer base through contract renewals into multi-year contracts. £0.8m of FY23 adj EBIT accounts for an accruals release of £0.1m previously excluded from forecasts, and – following delayed hires in FY23 – the sales team is now at full strength, with the strongest pipeline it has seen in recent years. At this point, we conservatively reiterate our FY24 revenue forecast of +2% yoy growth to £2.8m, and introduce FY25 revenue growth of +7% yoy to £3.0m. The annualised impact of the investment in sales then leads us to revise our FY24 adjusted EBIT to £0.5m, while we also include net interest income of £0.15m in FY24 and FY25. The combined impacts lead to FY24 net cash increasing by +3% to £6.8m then our new FY25 forecast of £7.2m, which provides the opportunity to continue to increase shareholder returns and/or evaluate attractive acquisitions. We expect revenue upside from new wins will benefit from strong operational gearing to profitability, noting some pipeline contracts have potential to exceed the entire revenue uplift currently forecast for FY24 and FY25, and we look forward to Arcontech announcing further client wins. We reiterate our 180p TP based on 34x our conservative FY25 EPS forecast, and at 89p, Arcontech is trading on 12-month forward multiples of 19.5x P/E, 7% EFCF yield, and an attractive 4% dividend yield.

Changes to forecasts – We include a summary of the changes to forecasts on p7, where we conservatively leave FY24 revenue unchanged at 2% yoy growth and account for +22% yoy growth in adj opex to reflect the annualised impact of investment in sales ahead of client wins, supported by the strongest pipeline in recent years. In FY24 we now expect adj EBITDA of £0.6m -28% from £0.8m, adj EBIT of £0.5m -33% from £0.7m, and 4.4p adj dil EPS (previously 5.2p). In FY25 we expect conservative 7% revenue growth and an increase in adj EBIT margin to 19%, as a result of operational gearing from revenue growth. - Strong cash position can drive increased shareholder returns and/or M&A – Following net cash of £6.4m at FY23 and strong working capital management, we conservatively increase our FY24 net cash to £6.8m and introduce FY25 net cash of £7.2m, following strong EFCF of £0.8m (FY24) and £0.9m (FY25) and 5% DPS growth in both years. - Arcontech has excellent potential to capitalise on its strong pipeline – Arcontech benefits from the quality of its software, its strong relationships with tier 1 institutions, and c100% recurring licence fee revenue. As market conditions for new sales continue to improve, we expect the investment in its technology and salesforce will generate operating leverage to profitability from new and existing clients. The strong cash position provides flexibility to continue to invest in the potential of its platform, increase shareholder returns, and/or benefit from M&A.

[nchanning] 27/7/2023 16:07

Imagine if they actually win a couple of new clients , the ARR drops straight through to bottom line and we get a 20 x ex cash multiple that a growing SAAS business deserves

[arthur_lame_stocks] 26/7/2023 18:01

It might be more accurate to look at net current assets rather than gross cash. In that case I would think the enterprise value is around £4.5m which still seems good value.

[nchanning] 24/7/2023 15:18

Got a feeling that management are softballing a bit for a management buyout at a 50% premium . We're 50% ahead on profits for this year but zero change to expectations for next year doesn't quite sit right . No attempt to be promotional at all about sales pipeline

[nchanning] 24/7/2023 11:03

There's say 400k of listing costs that could be taken out by a trade buyer who could easily finance the purchase using Arcontechs own cash and some debt

[moathunter] 24/7/2023 08:30

Agree with you, Value Hound- this does seem very cheap and I bought at 65p recently.
Deducting the net cash, the company is available for £3m and has high RoIC likely due to high switching costs (in the software joining together multiple more expensive data feed software for investment companies) and scale economies from the fixed cost software.
Also ARC has 2 new products in alpha testing prior to launch (tick history and another one) that would widen Arcontech's appeal. Together with hiring 2 more sales people; although ARC has a long selling process, any contracts that are sold tend to be long-running and so the increased staff and new products suggest a good probability of rising sales and free cash flow in the future.

[trident5] 24/7/2023 08:18

Presumably, they fired their sales team.

[value hound] 24/7/2023 07:51

I bought a few more of these last week - so got all excited when I read "adjusted EBITDA and adjusted profit before tax is expected to be ahead of market expectations by approx. 31% and 49% respectively through a combination of lower than anticipated staff related costs arising from lower variable costs and delayed hires."

But the follow-on: "These are expected to be once [SIC???] off savings in the year to 30 June 2023. Expectations for the current financial year therefore remain unchanged" dampened my enthusiasm a bit.

Still v undervalued. I'm hoping for a trade sale at twice the current share price (but then I could say that for all my holdings! :-)

[dangersimpson2] 03/5/2023 20:09

Buying after ST tips - how to lose £7k in 2 months!

[gleach23] 03/5/2023 18:52

...and the same trade reported late today would explain yesterday's weakness! Dated 2 May, timed at 10.04, 40,953 shares sold @ 66p. Oops.