Gresham Technologies Share Discussion Threads

[jprich] 13/1/2020 13:31

I would like to think a bid is a little time away as revenue from Clareti is still small, thats what I am hoping!

[gottafly] 13/1/2020 11:00

Yes good number of trades this morning but the share volume is low and therefore these must be private deals. I guess that people have researched GHT over the weekend and decided GHT is worth a punt.

As regards the SP, with thin volume and strong PI interest then who knows where it might get but my view remains that the share price level is underpinned by institutions so we really need to see some larger deals to feel comfortable about the share price rise. Of course you could argue the higher the share price goes without any institutional cash in then the higher the intrinsic value of the company. Conversely you could argue that any large sale would see a capping of the current rise. I reckon it would be reasonable however for the share price to settle around 150p which was where it was at before the badly received December 18 trading update/profits warning.

Going back to a bid, one defensive strength GHT has is the strength of the balance sheet and cash reserves. I have not looked lately but many of GHT's competitors cannot match this financial strength (high leverage etc.) and I for one would not be looking to 'swap to just any other paper'. For me, for a bid to be serious then it would have to be cash based.

[tacticaltrader] 13/1/2020 10:48

A message awaits you

[jprich] 13/1/2020 10:27

As i said 200p this year but not sure how much over 200p, am waiting on forecasts for 2021 should be exciting.

[gerihatrick] 13/1/2020 09:55

expressing an opinion of which Kestrel holdings are potentially vulnerable to a takeover is not ramping. I would appreciate you sharing your views-which is different from ramping! Interesting to see the share price creeping up again this morning.

[tacticaltrader] 13/1/2020 09:24

A bid wouldnt surprise me either right now. Low ball £2.00 and then a bun fight to around £3.00 the way things stand. Of note is that quite a few of Kestrel's holdings appear vulnerable to a similar outcome at present - with Brady & Nasstar having recently been taken out. I have my suspicions as to which of their other holdings are next up but I'll keep that to myself - would hate to be accused of being a ramper!

[gottafly] 13/1/2020 08:44

6gr welcome to this well established, dare I say long suffering BB.

I accept that liquidity could be a bit better than perhaps the raw figures suggest but there is no doubting that this is an institutional controlled share. As we have seen in the recent past, if someone wants to bail out then it puts a severe downside effect on the share price The truth is that as PI's we are mere bit players and one of my concerns is that GHT release the very minimum of public information and that there is an uneven playing field with the institutions who I am sure receive broker attention.

Not sure about your comments regarding pricing, I know GHT are very aware of the dangers of low balling. Im has specifically mentioned this. The problem as I see it, is that the big growth area is the competitive knocks outs and replacement legacy vendor systems. GHT will I am sure promote value rather than simply price to get a deal, however, the current legacy suppliers will work very hard (including financial incentive I suspect) to keep the client, so I suspect that pricing will play a part.

Given the big wins that GHT are making they will, as you point out, be increasingly visible to the market and I suspect are becoming hard to ignore, although GHT is still at the moment very small. GHT clearly have a superior product and therefore a technical advantage but this unlikely to last for ever, so I would suggest that time is of the essence.

You raise the point that GHT could well be subject to a bid and this has been muted on here before. Particularly, you say that 'we are just at the start of long slow run of upward momentum' and it is the slow bit that worries me. IF GHT cannot substantially accelerate growth, I personally don't think 20/30% is enough to keep the wolves away, then a surely a bid will come.

I believe there is a great prize to be had but will GHT be given the time to deliver? 5+ years seems a long time frame to me.

As always DYOR

[warranty] 12/1/2020 22:25

Thanks for that 6gr, I’m much more comfortable with my investment here now. I’m usually more of a yield investor but the growth capability here led me to buy in. Happy to hold long term and hope that you’re right.

[jprich] 11/1/2020 21:56

Best post I have read here in decades and I am not kidding!

[6gr] 11/1/2020 13:53

Thats an interesting analysis of the holdings, but I would be careful about drawing too many conclusions from it.

The institutional figure will include the market-makers holdings which is very much liquid stock and some of the institutions are also happy to buy and sell based on price movements, as happened after the Trading Update, where volume was huge. The price movement then was less than has been seen in recent days on very small volumes.

Additionally many holdings from individual investors will be held within nominee accounts at stockbroker, investment firms or SIPP providers, which are likely reported as 'institutional holdings'. My holding is reported by a SIPP provider for example.

What is clear though is that there is good momentum in trading, with GHT having products that clearly work well for their financial sector clients. This is a very deep global pool of potential clients, so the potential for new clients is massive and the investment in the sales force welcome. The switch towards recurring revenue is great as although it can be a little painful during adoption, it provides a huge stability of revenue, enabling better planning and also a higher p/e attribution.

The operational upside leverage of the business is huge, given that the cost of providing services to new Clareti clients is small. Whilst there will be swings in some of the lower profitability consulting aspects of the services (which is of little concern) the Claretti revenues should keep growing every year by 20-30% in my opinion.

My investment horizon is 5 years+ so the bullish case for me is that in 5 years time they could have a revenue of £60m+, be generating profits of £20m+, have a market cap of £500m and a share price of £7+.

The costs of Claretti to many of the clients is actually very small. I worked in global investment banks and financial institutions and their total spend on IT and compliance is in the billions per annum. The annual cost of the Claretti products are less than the loss on a single deal if it goes wrong or a fraction of a fine for non-compliance from a regulator. If anything the risk is that GHT as a small company is too conservative in its pricing and underprices its products, which is commonly the case when a smaller company engages with massive clients.

I suspect that many of the sales of these products are to companies who MUST buy a solution, so the only issue is ensuring that GHT can prove they have the best product and that they are a credible competitor to the larger legacy vendors. They have done so with many big wins and their increased financial stability, cash reserves and profitability will help calm nerves with buyers.

Once they start to really threaten the legacy vendors (which they are already) I'd be amazed if they weren't subject to a bid. At that point my concern is that the low ownership of the stock by management means any takeover will be determined by the institutional fund holders with management unable to hold much sway over the direct voting share. This often results in companies being sold too early during a growth phase.

I believe we are just at the start of a long slow run of upward momentum in both trading results and share-price.

[gottafly] 11/1/2020 09:04

Well the end of another pretty good week for GHT, an excellent trading update and some solid share price movement. I suspect that things will quieten down now until we see the full years results (and perhaps another trading update) in a couple of months time.

Having been looking again what information is freely available (i.e. without a subscription service), thanks once again Qantas for the link.

One really interesting feature was the share ownership breakdown:-

General Public - 1%
Employee Share Scheme - 1%
Individual Insiders - 5%
Private Companies - 0%
Institutions a whopping 92%

Please note rounding means this adds up to 99%.

The general public figure is 913,094, ES 976,596, Individual Insiders 3,333,621 and Private 166,444. Although I am not entirely sure what Individual Insiders means (any ideas anyone) this means the total available (to the general public/PI's etc.) non institutional shares is only about 5.3 million.

Clearly institutional shareholdings dominate, not sure what this means for the share price but it does appear there is a potential shortage for the general public, so buying might become problematic given the current confidence around the share.

[gottafly] 09/1/2020 15:59

Legal Counsel

[gerihatrick] 09/1/2020 15:22

who is Jonathan Cathie?! ?PR man !

[gottafly] 09/1/2020 10:11

Seems the GHT charm offensive continues.


Jonathan Cathie
@JonathanCathie
·
Jan 6
It’s been a great year for Team Gresham! Amazing what we can achieve together. Looking forward to breaking new records in 2020! #newyear #awesome

[gottafly] 09/1/2020 08:43

Qantas thanks for the information, very helpful indeed and gives an insight into N1's (now) positive view of GHT albeit I could not see any specific information regarding their forecast for the share price I would recommend that people follow the link and have a look for themselves.

N1 are naturally cautious, particularly with GHT, but we do have a few more snippets. Reference the Jan 6th profit update. Apparently N1 were surprised at the £4m EBITDA stating that their upgraded estimate (would be nice to know when this was done) was £3.7 - so a bit of over performance here. The sales of £25m and ARR of £9.6m were apparently as expected, so I presume that higher margin Clareti business was the driver - the deal signed in December?

The specific mention of the Tier 1 global bank deal for CTC was described as very encouraging! N1 also predict Clareti sales growth of 25% (against a higher software industry forecast of 29%) which is excellent (this would give Clareti sales of £19+m for 2020) but I hope this will prove on the low side given GHT's statement that the Tier 1 deal will "underpin the existing plans and expectations for Clareti software revenues in the financial year". They also state that whilst GHT is trading on just 4 x Clareti sales that considerable upside remains - clearly N1 believe the value in GHT is solely around Clareti.

As always DYOR but yet more encouraging information, it is particularly pleasing that N1 appear to be fully supportive of GHT, something (in my view) that has not always been the case in the past.

[qantas] 08/1/2020 19:03

Following last month’s trading update and upgrade,

@greshamtech

has provided a further release, communicating £4.0m of EBITDA is now expected – higher than upgraded estimate of £3.7m. Report by

@nplus1singer

#shares #stocks

Please do your own resesrch as always

[johnwise] 08/1/2020 12:58

6 January 2020

"Remains debt free"

Group revenues for the year up 30% to GBP25.0 million

-- Total Clareti revenues up 30% to GBP15.3 million

-- Clareti software revenues up 39% to GBP11.0 million

-- Other (non-Clareti) revenues performed strongly up 29% to GBP9.7 million

-- Group Adjusted EBITDA* up 344% to GBP4.0 million

-- The Group closed the year with cash at GBP9.6 million and remains debt free

[4-10] 08/1/2020 12:08

Here is what Holways UKHotViews from TechMarketView had to say on it

Gresham Technologies closes out 2019 strongly
Jon C Davies, 08:52, 06 January 2020
Gresham Technologies, the specialist provider of real-time, transaction control and data integrity solutions to the financial services sector, has released a trading statement highlighting its excellent performance during 2019.

For year ended 31st December 2019, Gresham expects to report a 30% increase in group revenues to £25m, with total revenues derived from the company's flagship software, Clareti, up 30% to £15m. The figures also indicate that Gresham has successfully made the move to subscription pricing, with Annualised Recurring Revenue (ARR) for Clareti up 30% to £9.6m in 2019.

Gresham maintained its strong momentum throughout 2019, having reported revenues up by 36% at the half-year stage. The company secured a number of new Clareti customers during the year, with 6 of these coming in H2, including a strategic win in the US, at one of the world's largest alternative investment management firms.

Under the stewardship of CEO, Ian Manocha, Gresham's management has good reason to be pleased with its achievements during 2019, and to be optimistic about its prospects for 2020. Gresham is set to report adjusted EBITDA of £4m for 2019 (+344%) whilst the group closed the year debt free, with a cash balance cash at £9.6m.

[gottafly] 08/1/2020 11:42

jprich, yes the share price has moved up this morning - 10 trades but very little volume, so I presume continued PI interest, for the price to stick you really need big institutional trades.

We, on here, did some share price guessing a couple of years ago with a concensus of circa 200p. I believe it got there briefly to them fall back to 65p! As previously stated, given the current small size of GHT, large deals (particularly if delayed somewhat) can make a huge difference and cause volatility.

I believe the general investment consensus is that GHT is somewhat fully valued, the 2018 profits hiccup still skews things because so much of the analysis is historical. However, one US based investment house expects GHT revenue to increase by 11.2% in 2020 against a software industry average of 7.1%, so over performance. The software industry annual earnings growth for 2020 is forecast to be 29%, so if GHT achieve that then I would be very content but if it exceeds that in line with revenue growth then!

However, the concern I have with GHT is that it has never really exceeded forecasts and for the most part just about made expectations. Perhaps this time it will be different and certainly we have a very bullish GHT management, so perhaps this is break out time, as always DYOR.

[jprich] 08/1/2020 09:29

Well its flying now, my prediction we will be over 200p by end of the year, how far above 200p I dont know.

I think 2021 forecasts will be interesting when they come out.

Would be helpful if they used all that cash to buy back some shares.

[gottafly] 08/1/2020 07:57

planit2 yes the confidence shown in the language used by GHT management is a considerable uptick so they clearly believe GHT is in a very good place. Indeed that confidence seems to be reflected on here. Other than a general market crash I cant see any downside in GHT given that they believe the Clareti 2020 numbers are already just about sorted - their words not mine. The big question is what, if any, is the upside - we have not been good at guessing that on here, so who knows. So where do we see the share price in 12 months time, I must admit I have no real idea.

[planit2] 07/1/2020 19:09

I liked this part of his comment, it shows that there are more deals being worked on so he is confident on the first part of the year
"good momentum in the business as we head into the forthcoming year"

[gottafly] 07/1/2020 16:15

richjp you say that N1 have issued upgrades on both Dec 23rd and Jan 6th which all sounds very positive. I know you don't see the figures but could these upgrades be just reiteration? N1 always keep their information very private but it would be great to know a bit more of their thought process, historically they have always been on the conservative side.

The share price has nudged up nicely today but there does not seem to be a particular reason - 19 trades so far but no great volume so all PI stuff.

GHT is still (sadly) very small and therefore individual large deals (which they seem to be increasingly chasing), whether won or delayed/lost, have a significant impact and therefore underlines the share price volatility.

As Qantas has pointed out IM seems pretty chuffed with progress having posted a 'rallying statement' on Twitter. And of course the Dec 23rd RNS was very very positive, with the Jan 6th RNS stating another Tier 1 bank was about to be signed thereby securing the 2020 Clareti figures! So there appears to be very little downside for GHT at the moment, only upside but as always DYOR.

[qantas] 07/1/2020 14:34

Ian Manocha, Gresham CEO: "Thanks to hard work from the team, the Group made significant progress in 2019 with 3 major legacy reconciliation vendor replacement agreements and multiple new Clareti client wins."



Please do your own research as always as it is your money...