Eleco Public Share Discussion Threads

[lgw500] 26/8/2016 11:38

Gentlemen,

Thank you for your friendly comments. It is always great banter amongst us and is great fun! I do so hope you are proved correct as we have far too many shares. Do let me know if you are interested in buying some shares from me at current levels.

With kind regards

[aishah] 22/8/2016 13:08

Maybe market is waking up finally! share price now nicely above 20d and 50d SMAs and not far off 200d. Might add more. dyor

[ansc] 19/8/2016 17:10

rathkum; just ignore the never-ending whingeings of a poor loser. Has always moaned about management's lack of abilities/nous ever since he joined this thread. But when the opportunity arose at 2015's AGM to question the Board face-to-face, he didn't have the balls to ask a single question. Just another one of those spineless critics hiding behind the anonymity of a bulletin board.

[rathkum] 19/8/2016 13:01

Take a look at Sopheon and see how the share price has nearly quadrupled in under a year once the market woke up to its growth potential. Similar market cap to Elecosoft but lower on revenue and PBT. Elecosoft has a long way to go before it gets taken out at a much higher price.

And LGW500 is advising you sell up.LOL

[lgw500] 19/8/2016 11:41

Good selling opportunity before general market turmoil in mid-September. No doubt the market makers will not have space for more than 50,000 shares at a time.

[aishah] 19/8/2016 11:07

Market is sleeping here. Around 70% of revenues are non-UK. So sterling weakness will be a BIG kicker imo. I've been adding over the last few weeks. dyor

[ansc] 12/8/2016 20:26

Another satisfied Astapowerproject customer:

[aishah] 04/8/2016 14:47

It's been on my watchlist for a long time - ever since Techinvest started coverage last year. Incidentally, they added 30k @27 back in October to their Trader Portfolio. I feel now is a good time to invest with a UK rate cut and weak sterling. finnCap fcst is 1.3p for 2016. Low PSR and PEG.

[rathkum] 04/8/2016 13:53

AISHAH

Welcome on board.

Just out of interest, have you been following this company to have made your first purchase or was it somewhere you read or was tipped in some publication that made you decide.

[aishah] 04/8/2016 11:08

I've been adding here. Sterling weakness will have a kicker effect. Possible divis in 2016 too. dyor

[rathkum] 04/8/2016 10:39

Investors would likely focus on metrics like enterprise value to sales and enterprise value to recurring revenue when thinking about valuation.

To me,buying a software company on an enterprise value to sales metric of less than one times is typically solid buying as is the case with Elecosoft, now that its market cap is just under £15m.

[chrisdgb] 01/8/2016 15:32

What ratio to sales do these software businesses trade on..??

[rathkum] 21/7/2016 16:50

Thanks to Brexit it is beggars belief that the ELCO market capitalisation to historical sales ratio is now less than 1 given the current share price, tempting me yet again to add hopefully my last tranche at 20.7p. One wonders how the likes of Lombard Risk, Kalibrate,Brady etc.can command such a generous rating.

[ansc] 30/6/2016 11:32

Another pat-on-the-back for Asta Powerproject:

[as usual, read the full case study]

[rathkum] 25/6/2016 09:05

“This is one of those updates that really packs in a ton of value,” said Jim Dawkins, US channel manager for Elecosoft

[lgw500] 24/6/2016 13:43

Well, Elecosoft should now be the beneficiary of BREXIT with the majority of its earnings earned in Euros!

[ansc] 23/6/2016 10:24

At the recent AGM, the chairman was asked how a BREXIT outcome today would affect the company. With most of the company's profits being earned abroad, he answered, a weak pound (as all the so-called financial experts are predicting will happen following such a vote) would enhance such profits and also make company exports that much cheaper. A REMAIN vote would have little effect.

[ansc] 22/6/2016 10:03

A new version of Asta Powerproject launched:

[chrisdgb] 13/6/2016 07:48

Assuming such a bullish article will generate some decent buying interest today.........

[chrisdgb] 12/6/2016 09:55

nice post.......67p sounds good....!!

[rathkum] 10/6/2016 21:00

Elecosoft - Update

BUSINESS DESCRIPTION

Elecosoft (ELCO) is a London AIM listed software company. This software business was established in 1994 and serves the Swedish, German and United Kingdom construction industry with particular focus towards architectural, engineering and construction ("AEC").

ELCO's has software product knowledge around visualisation, CAD/design, estimation, engineering, site control, project management. The company is increasingly wrappings its software functionality into a building information modelling (BIM) products.

The company's core software smarts sits in its estimation software 'Bidcon' which came out of Sweden and its Project Management software 'Asta Powerproject' from the United Kingdom. The company's competence and background around visualization, CAD/CAM software, estimating and project management lend themselves nicely to the ongoing development of the ELECO BIMCloud product.

ELCO traditional markets are UK (32% of sales 2015), Sweden/Europe ex Germany (48% of sales), Germany (15% of sales) and rest of world (5% of sales) with Elecosoft Asta announcing a flagship United States reference client in 2015 with the US State Department of Transport.

The company only emerged as a pure software company in 2015 after exiting other construction businesses. ELCO sell multiple software products mostly through its direct European sales teams (93% direct) while re-sellers are used in international markets (7%). The company had 178 employees in 2015 with historical revenue splits 30% initial licence fees, 48% maintenance/support and 22% services revenue. The Project Management software team is located in the UK, Visualization/3D CAD in Germany while Estimation and Engineering resides in Sweden.

The Swedish business 'Consultec' includes both engineering and estimation software, with the Swedish architecture services business divested in late 2015. The calendar 2016 year will be the first full financial year that ELCO operated as a software only business, albeit it only had a small Swedish services business divested in 2015.

From a distance it appears there has been quite a lot of change at the executive level with the CEO (April 2016) and Financial Director (June 2015) departing under the helm of the Executive Chairman (controls 12% of the scrip) while the ElecoSoft UK CEO was appointed Group Chief Operating Officer from April 2016.

ELECOSOFT PRODUCT RANGE - by User Roles / Core Function / Product Name (s)

Designers / Floor Visualization / Interiormarket, ESIGN Software (Germany)*
Architects / CAD Design / Arcon Evo, o2c (Germany)*
Estimators / Estimation, Project Planning / Bidcon (Sweden)
Structural Engineers / Engineering / Staircon, Statcon, Framing CAM/CAM (Sweden)
Site Managers / Site Control / Matrix (UK)
Project Managers / Project Management / Asta Powerproject, Asta Powerproject BIM, Sitecon, ElecoM@trix (UK)*
Main Contractors / Building Information Modelling (BIM) / ELECO BIMCloud (* denotes the inclusion of the above functionality) (UK)

The flagship product is the Project Management software 'Asta Powerproject' with ELECO BIMCloud also offering substantial potential. The cloud product 'ELECO BIMCloud' is focused around collaboration and pulls much of the above products functionality (Project Management, 3D data compression, Cloud Functionality, Data exchange) while offering some integration with third party software (i.e. Autodesk Revit).

The company believe the UK Government mandate on the use of building information modelling (BIM) systems from 2016 is providing a positive impetus in the uptake of BIMCloud. There is however some slowing in construction spend in the UK as the economy holds its breath around Brexit.

Elecosoft has a strong presence in European small/mid tier construction companies and stand to benefit if their project management and BIM products can get some traction. The likes of Australian SaaS company Aconex buying German cloud and collaboration company Conject Holding GmbH at 2.7 times EV/Historical Sales may quicken the shift to pure cloud delivered building software and pressure Elecosoft. We also saw Oracle buy construction billing SaaS company Textura on 6.7 times EV/Historical Sales which highlights the current listed markets are rewarding pure cloud software business models.

ELECOSOFT BRAG SHEET

90 the top 100 contractors/builders in the UK use Elecosoft.
49 from the top 100 building companies in Europe use Elecosoft.
14 of the leading construction companies in Germany use Elecosoft.
Asta Power Project voted best project management and planning software at the 2014 and 2015 UK Construction Computing Awards.
ESIGN software GmbH 'FloorMarket' product used by 70% manufacturers in European counties.
100,000 users of Asta Power Project

ELCO argue the construction systems market is fragmented with small players unable to compete because of limited software development budgets, while larger companies don't have the depth and specialty knowledge in their applications that ELCO does. While this may be true the emergence of pure SaaS delivered project management and estimation software is a threat to Elecosoft's predominately server/desktop based technology.

ELCO are bundling more of their intellectual property into their new BIM product which is where the market is heading albeit cloud native applications have distinct advantages over server and hybrid developed models. The ELCO software products look to have their architecture largely developed in the server environment so it will take time, innovation and money to properly position the company into true SaaS offering. There are some questions around Elecosoft's true commitment to consolidate their technology stack, integrate technology and move towards a pure SaaS model.

2015 SUMMARY

The company 2015 revenues grew 9% in constant currency but headline growth numbers were muted by Sterling strength. The functional divisional revenues are split out below.

Project management £7.50 million +11%
Estimation £2.6 million (11%)
Engineering £2.4 million (6%)
Visualization £1.44 million (6%)
CAD/Design £1.0 million (3%)
Site management £0.40 million 0%

In 2015 the company spent £2.3 million on software development (£2.6 million in 2014), with £0.665 million capitalized (2014 £0.553 million capitalized) and £2.0 million expensed. This equates to total software development spend as a percentage of sales of 15.1% which is about right for a software company. The flagship project management solution Astra Powerproject was the engine room for project management divisional growth of +11%. ELCO reported £1.8 million EBITDA, PBT of £1.0 million while generating £0.55 million free cash in the 2015 calendar/financial year.

2015 SOFTWARE DEVELOPMENT FOCUS

Rewrite and release Arcon Evo CAD design software in 2015
New Bidcon product incorporating functionality from number of legacy products (2015/2016)
Continue to develop BIMCloud functionality
Look for software integration opportunities

2016 SOFTWARE DEVELOPMENT FOCUS

Sitecon development
Integration between Elecosoft applications (Big Push)

VALUATION DISCUSSION

ELCO has circa 75 million shares on issue so using the current 24p share price, the company is capitalized at £18.0 million pounds, while generating 2015 sales of £15.26 million.

The ELCO market capitalization to historical sales ratio is 1.18 times. The company had net debt of £0.44 million at 31 December 2015, giving an enterprise value (EV) of £18.44 million and an EV/Historical Revenues ratio of 1.20 times.

The historical EV/Recurring revenues (2015 maintenance revenue = £7.28 million) ratio was 2.54 times. The company generated EBITDA and operating profit of £1.8 and £1.0 million in 2015, which places the company on historical EV/EBITDA and an EV/EBIT multiples of 10.2 and 18.4 times respectively.

The company guided they expect significant revenue and profit growth in 2016. ELCO subsequently updated the market in May 2016, that revenues for the 4 months to the end of April 2016 were +10% against the corresponding period in 2015. This suggests EV/Revenues for 2016 could now be sitting around 1.1 times.

The opportunity for optimistic investors is Elecosoft can grow its revenues at 10% plus for the next few years, which gets the company on the road to revenues of £20 million and EBITDA of £4 million (20% operating margins).

Investors could easily ascribe an EV/EBITDA multiple of 12.5 times to any globally focussed software company earnings suggesting a share price of 67p is achievable within 1-2 years. In the meantime with balance sheet repair having largely occurred investors can expect dividends to restart and move towards 1p or 4% yield conceivable in 1-2 years.

The downside is pure-play SaaS construction software dominate the market superseding traditional software vendors in an environment where Elecosoft lacks Board/Management stability with question marks around the software development and technology road-map.

[chrisdgb] 09/6/2016 09:57

Some buying last few days, market looks tight on stock....

[ansc] 03/6/2016 13:58

More Asta Powerproject praise:

[read full case study]