Beeks Financial Cloud Share Discussion Threads

[29palms] 04/4/2022 22:55

£2.8m is a drop in the ocean given that Gordon McArthur's holding is currently worth £45.3m at today's mid close price.

[typo56] 04/4/2022 22:01

Note if it's oversubscribed (which it probably will be) punters will also be buying £2.8m worth of CEO Gordon McArthur's shares.

[29palms] 04/4/2022 19:07

Looking like Primary Bid offer will close early.
Good sign IMO

[carpetman2301] 04/4/2022 17:49

I've added, but they seem to want to hold your money for a long time. Reading the info on Primary Bid, the shares will not trade until 25/4/22.

[ali47fish] 04/4/2022 17:16

you can only invest in a nominee account so not in isa not good forme!

[29palms] 04/4/2022 17:15

Be a shame not to.

Coffee Can share!!

[golden_eagle] 04/4/2022 16:56

Placing and Primary Bid offer

Anyone going in for this?

[29palms] 28/3/2022 13:15

Canaccord increasing their holding by another 3% on 24th March
Coffee Can share indeed.

[petewy] 27/3/2022 13:18

I was going to buy more but the Mark Simpson piece has made me wait.

[saltraider] 25/3/2022 19:21

"I am wondering whether recent market volatility tends to increase demand in BKS' sector?"

@cordwainer I think you are likely right. The greater the volatility the more value attaches to minimal latency (i.e. being almost instantly up-to-date data). We know there is money to be made in having the most fractional of time advantages over your neighbour. The bumpier the ride, the bigger the gains from having that advantage.

[cordwainer] 25/3/2022 16:10

Personally I think 1.1 million cash at interims along with statutory losses of about 0.25 million is probably ok to be getting on with. I would not project extra capex at quite the same proportions as recent product developments and hopefully there is some economy of scale coming into play along with the growing amount of data processing and networking involved on the costs side.
The cited 89% recurring revenues among the continuing growth probably explains the premium level PE ratio. Forward p/e of 32 not all that high, it's been seen at times in traditional fast-moving consumer goods companies for example due to reliable cashflow but consistent dividends rather than strong growth.
I am wondering whether recent market volatility tends to increase demand in BKS' sector?

[saltraider] 25/3/2022 15:47

@Rivaldo

Nice that you rate Mark Simpson and LeoInvestor highly. I don't, however, after reading that very shallow and ill-informed analysis. Following the recent RNS, there are much better and more thorough analyses of Beeks' performance and prospects available (take a look at Stocko, for example).

As Hydrus notes, focusing on EPS doesn't make a lot of sense for Beeks, which is investing to support a surge in volume that can be expected to deliver significant sustained earnings growth in future. Perversely turning a blind eye to the company's own explanations and analysis is either none to bright or deliberately manipulative.

I'll be kind to them and assume it's the latter.

[masurenguy] 25/3/2022 15:38

Post #222 - interesting analysis Riv, which is perfectly reasonable if one is just utilizing conventional financial metrics to try and determine a realistic valuation equation. However, this is a leading edge tech company and momentum, potential and first mover advantage are all relevant factors in determining potential valuation.

Below is a link to the company investor presentation on the recent interim results that was made yesterday if you, or any other potential investor, would like to explore their business model further.



I first invested here some three and a half years ago and when the price hit 200p circa 6 months ago this became a 3.3 bagger for me. I felt that it had run ahead of itself at that point so therefore I sold just over a third of my shares @198p to recover my complete investment and have kept the rest as a long term free asset, so I remain positive on their future potential.



In due course I am certain this will be acquired by a larger operator, probably a financial broker like IG or Cantor Fitzgerald, who could derive greater integration/cross pollination value from both existing and legacy clients. I note that someone has provided an interesting alternative perspective which I have reproduced it below. I don't endorse or critique either view - everyone must draw their own conclusion and the company presentation and the two different views can contribute to that process.

"The writer doesn't appear to understand Beeks business or opportunity at all, which is a shame really as it is the least I'd expect from someone commenting and writing on the company. I would perhaps direct them to the recent investor meet presentation to get a more informed view. The current cloud opportunity to financial institutions is huge. The revenues are phenomenally sticky, annually recurring and tend to run for many years. The company has gained a distinct momentum now with a key inflexion point reached of being credible & accepted in tier 1 financial institutions as a private cloud provider and will benefit from the herd effect.

The current opportunity does require a reasonable amount of upfront capital on hardware though and management are quite open on this. They took the decision to invest the additional revenue into the business as there is a high operational gearing effect in future years, all noted in the recent contract win RNS's. The extra capital is being addressed in a couple of ways. Firstly by making some changes to contracts whereby money is paid upfront to fund that capital requirement. Secondly by looking to enhance the balance sheet. It could, as the writer says, be an equity raise but they are actually exploring asset financing and debt as well. The former appears to be the preferred option.

So the business invests in growth that plays through as annual recurring revenue. As the investment phase slows down the profits shoot up. In my opinion the business could easily be doing 10p+ of eps in the next 24 months if they so wish. I suspect it is likely to be bought out at some point though. Generally these type of businesses with valuable preferred supplier statuses in top tier financial institutions go for high multiples. I can think of a number in the 40* earnings bracket in recent times. Of course the writer should know much of this if they had researched a bit more throughly in my view. A disappointing piece."

[hydrus] 25/3/2022 14:46

Concentrating on EPS rather than the very fast revenue growth when they have clearly been investing heavily seems strange to me. I don't know why you'd value it on PE ratio basis st this stage. Anyhow, the gross profit margin decrease is explained in the results and again it's about investment (see below)A placing wouldn't be unreasonable but can't see raising a few million as an issue. Underlying gross profit in the period, which is calculated by deducting amortisation on acquired assets and grant income increased by 21% to GBP3.14m (H1 2021: GBP2.59m) with gross margin down at 41% (H1 2021: 49%), in line with expectations. The expansion of our asset base across our growing data centre estate has led to an increase in depreciation and data centre costs at a faster rate than our revenue growth during the period. The gross margin percentage has also been impacted by a higher proportion of hardware sales during the period which are at a lower gross margin than our typical infrastructure sales. As we deliver the material signed contracts over the second half of the year, we expect gross margins to increase in percentage terms as the cost of the infrastructure investment has already been made.

[rivaldo] 25/3/2022 13:49

Interesting review of BKS (I don't hold) just published from Mark Simpson and LeoInvestor, whom I rate highly.

I see BKS as a company with a good product and quality management in a growing market which could do very well - but whose valuation is too high at present, especially given the need for cash, so I tend to agree with 74tom's comments about funding and with the verdict below:



Extracts:

"However, this is a "growth" company whose EPS for 2023 is forecast to be below 2021 and is on 32x 2023E earnings. And this is for a company which has a relatively low gross margin and is very capex intensive. Seems bonkers to us."

"However, they don’t say if this contract requires further capex, which they patently can’t afford in the short term. Even if this contract win can be delivered from existing capital invested, they likely need more money soon and the announcement of a sizable contract win is exactly what you want before a large placing. The subsequent dilution will make the valuation look even dafter, however."

[cordwainer] 24/3/2022 13:44

sales momentum continuing, thankfully.
re cash: takeover target for LSE Group or similar ?

cordwainer22 Feb '22 - 09:13 - 200 of 220 Edit
0 1 0
encouraging momentum on revenues. back in for a modest amount this morning.

[74tom] 24/3/2022 09:44

Agree with those sentiments, however I would also say it appears fairly obvious they need to raise more cash to continue such excellent expansion. £1.1m cash with £4.5m debt doesn't provide much coverage for continued growth in operations. They raised £5m on 6th April 21 at £1.15, I'd be looking for a larger amount this time to really go after market share. It's clear they have something special but are undercapitalised at present.

[29palms] 24/3/2022 08:40

I imagine Paul Scott at Stockopedia has the same "Coffee Can" sentiment.

"another very encouraging contract win. It’s becoming increasingly obvious that BKS has passed a tipping point, where its cloud-based connection services for financial markets are being more rapidly taken up by big clients, globally.

Therefore an exciting future is on the horizon, as those recurring revenues build.

I reviewed Beeks interim results earlier this week. Although the numbers at this stage are barely above breakeven, that’s missing the point. It’s the very rapid organic growth, of recurring revenues, which is laying the groundwork for a much bigger, and potentially highly profitable company in future.

This is generally a bad time to be investing in growth companies, so there is that strong market headwind, but when growth is this strong, with big contracts rolling in faster than ever before, it’s time to sit up and take notice.

For that reason, and despite it being difficult to value, BKS is fast becoming a high, maybe even highest, conviction holding for me. I need to just ignore market sentiment, and buy more (as a long-term hold).

I think this is probably the best reasonably-priced, high organic growth company on the UK market right now"

[29palms] 24/3/2022 08:30

Coffee Can share for sure 😊

[pauliewonder] 24/3/2022 07:11

Another excellent contract win. Looks like the business is in great shape and getting better. Current run rate is $60m orders worth of new revenue generated per annum based on this quarters figures. Likely to be long term, sticky revenue too

[masurenguy] 24/3/2022 07:10

Superb - the largest individual contract that BKS have won to date. Onwards and upwards !

£4.4m Private Cloud Contract Win

Brings total contracted value of sales in the quarter to c.$15m

24 March 2022 - Beeks Financial Cloud Group is pleased to announce the signing of a multi-year Private Cloud contract. The contract , worth £4.4m over five years, is for a new European Tier 1 client, and was secured via a partner. The latest contract is testament to the strong sales momentum across the Group, now successfully targeting the world's largest financial services organisations and exchanges. Both the Private Cloud and Proximity Cloud Offerings have significantly contributed to Beeks' record third quarter of trading, with c. $15 million in total contracted value during the period, representing a three-fold uplift on our previous record quarter of Q1 FY22.

Gordon McArthur, CEO of Beeks Financial Cloud commented: "Successfully securing a further contract of such significance reinforces our belief that the prospects for Beeks have never been stronger, as financial services organisations accelerate their cloud strategies. Alongside other recent wins we have announced, this latest contract contributes towards underpinning our FY23 expectations. A substantial pipeline continues to build across our Private Cloud and Proximity Cloud offerings, and we are confident in our ability to further increase our market share."

[29palms] 22/3/2022 11:00

Analysts at Canaccord Genuity nudged up their target price on software and services firm Beeks Financial Cloud from 210.0p to 220.0p on Monday after the group reported interim sales that beat expectations.

Canaccord Genuity, which reiterated its 'buy' rating on the stock, said Beeks' first-half sales were stronger than it had expected, while adjusted underlying earnings were in line.

The Canadian bank stated Beeks' outlook statement was positive and that it had upgraded full-year 2022-23 sales estimates in February after its first three Prox Cloud contracts were announced.

"With the new Prox Cloud offering gaining traction, combined with the underlying increase in Private Cloud offering uptake from tier 1 clients, we feel confident that sales growth can exceed 35% FY21/24 and margins increase from FY22est by c100bps pa in FY23 and again in FY24," said Canaccord. "We further increase our sales forecasts for FY22/23 with no change to adj EBIT and introduce FY24."

[pauliewonder] 21/3/2022 09:45

Agree with both opinions above. However, I do think it is a matter of time before another update is coming. Note the following, which clearly positions this:

"The strong uptake is indicative of the momentum we are experiencing, with a substantial pipeline continuing to build across the business, notably in Proximity Cloud and Private Cloud"

and

"Even excluding the potential contribution from Exchange Cloud, the Board are confident in achieving results for the year in line with market expectations, having already upgraded FY22 revenue expectations three times in the last six months".