Gresham Technologies Share Discussion Threads

[amt] 10/1/2019 07:01

See my post 7240 where I had a go at a Clareti valuation perhaps 260m if all goes well.

[tacticaltrader] 09/1/2019 20:39

P. S congratulations on your recent purchases - I'm kicking myself for not having snaffled a few up.

[richjp] 09/1/2019 18:51

So on to the question as to how to value GHT. First of all I agree it’s difficult which may not be much help.

What we have really is two separate businesses under one umbrella, the legacy business with 2018 revenue of £8.1M which is declining and the Clareti business with 2018 revenue of £11.9M which is growing albeit at a slower rate than we would like. The two are so different that I think they need to be valued separately.

At an AGM three years or so ago I asked if they had ever considered selling off the legacy business. One of the former directors said that it had been considered in the past but nobody wanted to pay more than twice annual revenue for it. They therefore decided to keep it and at that point in time had received about ten times of annual revenue out of the legacy business plus of course more since, so clearly it was a good decision. I suspect that without the continuation of the legacy revenue there would have to have been fund raisings.

Concerning the Clareti side that is difficult. A current PE is meaningless particularly if we do have a pre tax loss although broker forecasts going forward could be a good base. A price sales ratio might be another way. To get a high PE the market would probably be looking for a higher growth rate than we have had recently.

Of course if a bidder comes along that changes everything and would depend on how much the bidder values the technology.

[richjp] 09/1/2019 18:49

I was away travelling when the TU came through and at first I was a bit concerned that it was sneaked out on Friday afternoon. It seems however that they got it right seeing what has happened subsequently. I find it interesting that the two institutional buys were recorded as having happened on the Friday. Makes you wonder what goes on in the city sometimes.

I think the TU was much in line with what was anticipated. Considering the drop in EBITDA I suspect that we may be looking at a pre tax loss when the full results come out in March but hopefully that is well anticipated.

I was pleased that they said they expect to remain financially strong throughout 2019 and beyond, although I would have preferred them to state more specifically something about their cash generation. The cash position looks OK particularly when you consider they had to pay out for the recent acquisition. I don’t see the need for a fundraising now at least in the next twelve months unless it was for another acquisition and I would not even mind that as long as any acquisition enhances earnings.

So having weighed things up, I decided that I thought that the market had over reacted with the sell off and with clumsy fingers on my mobile, bought another 10,000 at 69.5P on Monday morning. As the price moved up so quickly and I was in the money, I was considering whether to buy more, then along came the announcements regarding the insti purchases, so yesterday morning I bought another 10,000 at 79.8P so I am more overweight than ever with GHT or will be if the price recovers decently. According to the Hargreaves Lansdown website, if I have read it correctly, my two buys are comfortably the largest this week which I find surprising, unless there is something else going on in the background.

So I have had a good couple of days. I suspect 100P might be bit difficult to break and we will need to see the full financials before we can expect too much more, however I do think that revised broker target of 180P will be achievable this year assuming things get back on track. I think amt made a good comment yesterday, when he questioned whether the market would now be prepared to put a valuation of £2 let alone more on the company given the slow growth rate.

[double double] 09/1/2019 09:01

Gottafly
Not sure its worth talking about valuations of business of gresham, as our attempt at forecasting share prices proved, it is a futile exercise.

For me, very broadly speaking, IF they can get their revenues to £30m-50m, then profits are probably £10m-£15m, then we are in the big smallcap or even midcap territory. How long will that take who knows but big institutions have stuck by them for best part of 2 decades and so have I.

Like amt I am also seeing this as a second chance at lower prices, I have added and will add more.

[gottafly] 08/1/2019 11:10

dd thanks for the info, clearly very good news that these long-term investors see value at this level. It does seem that the share price fall has been somewhat overdone but some smaller (and I suspect recent buyers) have bailed out at any cost due to the missed 2018 numbers.

Also, the clear focus now is the Clareti recurring revenues, cash position and I guess EBITDA, with non Clareti and total turnover being secondary indicators.

So dd, any thoughts on how you would value GHT on Clareti alone?

[double double] 08/1/2019 09:21

Both Schroders and Hambro have increased their percentages.

[amt] 07/1/2019 16:19

Yes it's been a great day and looks like I timed it well this time.

[gottafly] 07/1/2019 15:32

Nice to see the share price up 13p/20%, perhaps our spirited discussion on here has helped a little.

[gottafly] 07/1/2019 13:21

amt sorry but I think you are missing my point. I do understand the basic business rules and the requirement for 6 monthly reporting and that large contract wins can fall the wrong side. My experience of sales cycles (quite extensive actually) is that sadly it is the norm for things to move right so this cannot have been a surprise to the GHT management.

The loss of 'grip' that I refer to is the lack of GHT foresight, the way they have reported and their selection of KPI's. The story now seems to be that GHT are chasing larger contracts (good) and that the timing of these are difficult to predict accurately and that we should concentrate on Clareti recurring revenue as the primary health measurement. The problem is that this is, after the event thinking/communication, and consequently the share price has collapsed.

There has been an ongoing concern on here that GHT simply do not provide enough information so that investors can make a judgement on progress, sadly this latest information flow has yet again underlined that.

[amt] 07/1/2019 11:49

Not long ago people were aiming for 3 quid. Investors are very fickle. I realised in was high risk short term when it was 1.60p so mostly sold out. Didn't make much mind you. I think the longterm story is just the same though. At one time I thought I could just buy these shares and leave them for ten years. Now I realise I have to be a bit more dynamic to make more money.
Like BGO these seem to be good shares to buy in and out of. I expect the market is going to be more cautious about sticking a 2 quid valuation on them for 2 or 3 years anyway. Always possibility of a takeover mind you.

[jadeticl3] 07/1/2019 11:17

In the period from mid July to end of November there was hardly any movement in GHT share price. Now it is all excitement. About 6 weeks ago we were speculating on whether there would be “the normal update” on January 9th. Well-before-that we had news we did not want to hear, quickly followed by more news we are not sure about, like “the curates egg”. Do we still expect the “normal update”? Now, today, the share price has jumped up over 10% (it was before I started to write this). Is this simply that the fall was overdone? Or has the existing news been read differently? Or what? This is exciting, is it not? At least I am pleased that I bought more of these when the price was below 70p!!

[amt] 07/1/2019 09:04

Pity. share price above where it was before latest RNS so market beginning to see through the noise.

[richjp] 07/1/2019 08:45

Are we now in a closed period? If so directors cannot buy at present.

[amt] 07/1/2019 08:25

Directors probably need to buy some shares to instill confidence. I wouldn't be surprised if they do.

[double double] 07/1/2019 08:11

I thought the update was positive, I had previously talked about 2019 and 2020 were going to bring us a step change and that large contract proves my point. It would have been good to win it in a more positive background. Some more of these in the next 18 months will see us at another level.

But I have to agree about IM 3 rns in 3 months, suddenly he cannot update shareholders enough and is looking a little desperate. Good!

[amt] 07/1/2019 08:00

Gottafly. I am afraid that's the nature of business. Its nothing to do with a loss of grip. If only the business world was that simple but its not. I have an investment in D4T4 which had a similar issue with timing of contracts. There was a temporary dip in share price which I made the most of. I shall do the same here.
Valhamos spot on. Couldn't have put it better.

[valhamos] 07/1/2019 07:58

Different perceptions; different accounting periods in which profits can be booked depending on the contract. All good fun, but the key point to return to is - is the Clareti product good enough and is the market it operates in big enough (is there a long runway) to give us growing revenues in the years to come?

[gottafly] 07/1/2019 07:57

Just noticed a duplicate posting, no idea how that happened, apologies to one and all.

amt I like your confidence and spin on the trading updates but sadly the market does not agree hence the share price disappearing down the proverbial toile

I do expect a shift in reporting emphasis from GHT and a rethink as regards their KPI's if, as would appear to be the case Clareti recurring revenue is the very key. A cynic might say however that GHT have focused on this because it is the only KPI showing a positive.

The trouble is that these recurring revenues are only about a third of the total, so if GHT is valued on these alone perhaps you can understand why the share price is now down two thirds. Not that I am a great fan of the dividend but this would suggest it will stay and possibly be increased (to boost confidence) to reflect the Clareti 'annuity' revenue.

[gottafly] 07/1/2019 07:16

amt, the first trading update in October was in the ordinary course and generally positive/steady as you goes. The trading update in December was an emergency correction saying things were not quite as rosy, the market reacted very negatively to this correction. The early Jan update was a further emergency correction hence my comment that GHT have been reacting to events rather than being in control i.e. loss of grip.

[amt] 06/1/2019 22:47

Gotta Fly. The one in October stressed the key importance of signing contracts before ye. Effectively letting investors know that there was scope for slippage. The one in December effectively stated it was touch and go. The one in January let us know they missed by a whisker but had signed a couple of very large contracts but didn't quite make it for 2018. Nothing emergency about them just keeping us informed.

[gottafly] 06/1/2019 19:17

amt, the first trading update in October was in the ordinary course and generally positive/steady as you goes. The trading update in December was an emergency correction saying things were not quite as rosy, the market reacted very negatively to this correction. The early Jan update was a further emergency correction hence my comment that GHT have been reacting to events rather than being in control i.e. loss of grip.

[amt] 06/1/2019 18:38

Gotta fly Three trading updates in the last three months shows that GHT simply does not have a grip on things.

I don't understand your point there. I for one am pleased they have kept us uptodate.

[gerihatrick] 06/1/2019 16:30

Clareti is doing well. The decision to sign contracts is totally outside their control . The latest statement shows that with the largest contract in their history and the influence of their financial year this has such an adverse effect on their share price I like deferred contracts as the market always marks them down so I see this as an opportunity...and have bought more...time will tell if I am correct! Clareti brings a disruptive technology and streamlines the processes considerably..replacing the old legacy systems. It will be interesting to see how SCSW and TI read the situation.