Gresham Technologies Share Discussion Threads

[amt] 19/3/2020 11:07

If its any comfort I reckon the Conovirus numbers in Italy will start to come down next week and the rest of Europe will follow except for UK which has not gone for lockdown yet (I assume it will now, better late than never) . The UK has lost a week vs the rest of Europe. Then after another 6 weeks the Virus should be well under control. Don't know about the US and rest of World but no doubt they will need a lockdown. When the lockdown ends there will be plenty of testing kits to help keep it under control. I suspect pubs, cinemas and other places where people meet will have to remain closed until next year when a vaccine is found. So not much leisure activity I am afraid but only for a year or so. Meanwhile other non leisure business activities can get back to normal although many working from home. Then the other concern will be will the economic shock impact and cause damaging consequences.

[richjp] 19/3/2020 10:11

jadeticl, I added on 23rd December last on seeing the TU on that date, which I thought was a clear buying signal. I paid 120P but that is the only one of my GHT purchases over the years that is underwater. I think it was a good decision at the time and I do not regret it.

I am not selling and never have in GHT. Over two years ago now I took the precaution of selling some of my other assets and keeping the proceeds in cash, as I thought the long running bull market in the US had to end some time, although I don't think anyone could have predicted the coronavirus issue. The result is that I have enough in cash to sustain my lifestyle for three years before I would be a forced seller of anything.

The result is that I am feeling relatively relaxed about what has happened, perhaps more than I should be, but we shall see.

[jadeticl3] 19/3/2020 07:19

richjp, this is very helpful thank you.

You forgot to tell us if you have been buying or selling so far this year!!

[richjp] 18/3/2020 18:25

I had to curtail a ski trip in Italy last week and was unable to attend GHT’s presentation as I usually do. I am now self isolating. I think the results were excellent and in accordance with the expectation set up by the January TU. There were one or two blips but that is to be expected and the bigger the company gets the less impact they will have.

amt, I think you may be placing too much emphasis on the PE ratio. As shown on this website the PE, although based on 2019 earnings, is dynamic and changes with moves in the share price and market cap. As I type this it is down around 41 rather than 50 a couple of weeks ago. There were also a number of exceptionals this year including the £647K write down because of the discontinued venture with Mountview and others which I do not fully understand. That had a significant impact on the bottom line and hence the PE. Many tech companies pour a lot of money into market development and have much higher PEs still. The likes of Uber, Snapchat and Spotify do not make profits at all, yet the market has been quite happy with that, so they will not even have a PE even though they are billion dollar companies. If the PE has significance, I would be more interested if one of the brokers has provided a forward PE for 2020, which should be free of exceptionals because exceptionals cannot be known at this time.

An often preferred measure for growing tech companies is the price to sales (PS) ratio. Again as reported on ADVFN it is dynamic and for GHT currently standing at 3.14. The lower the PS ratio the better. Everything I have read says that PS ratios should be compared with companies within their specific industry sectors. The following site gives the average PS ratio for software and programming companies as 5.86 hxxps://csimarket.com/Industry/Industry_Valuation.php?s=1000

I believe the figure of 5.86 is based on the last four quarter earnings so therefore is not dynamic. As there are no reported figures for any companies for Q1 2020, that average PS ratio is not up to date and will not take into account the recent market falls. If we use the recent high of 150P for the GHT share price to compare like for like (i.e. before the crash) the PS ratio was still only 4, well below the average. The share price crash is purely down to the coronavirus scare.

I think the biggest concern for GHT is the travel ban. Although they are expanding their sales teams internationally, I am sure IM and perhaps other senior management get involved with the major deals. A tier one bank I suspect will want to meet the CEO face to face. Having said that, most prospective clients should by now have completed their budgets for the year and know which projects they want to sign up and get started and will hopefully still try and go ahead.

If not for the coronavirus problem I think the share price would be progressing beyond the recent high and moving up towards more like 180. If the GHT share price ratio were to increase to the industry average of 5.86, that would give a share price of 215P which two weeks ago I would have thought to be a reasonable target for the end of this year.

[gottafly] 18/3/2020 14:17

amt, sorry don't agree that this will adversely effect GHT.

This statement - "Swift is to delay the original ISO 20022 migration date for cross border payments by 12 months, from November 2021 to the end of 2022, as banks struggle with decommissioning and preparing existing infrastructure for the transition" - shows that the delay (a year is not much) is due banks struggling with their systems. This is 'meat and drink' for GHT in my view.

As always DYOR but I view this as a positive for Clareti.

[amt] 18/3/2020 13:38

Yes I am afraid that decisions are going to be delayed and so would expect an impact on Gresham business. Share price has held up very well so far though.

[qantas] 17/3/2020 22:48

SWIFT announces delay to ISO 20022 cross-border #payments migration as banks struggle to prepare legacy infrastructure for the transition. Discover the key to connectivity with the Clareti platform: #fintechcollaboration #reconciliations #cashmanagement hxxps://t.co/WFCWMZUDZr

[amt] 16/3/2020 12:02

Well, it happened. Maybe worth buying now or maybe it's too soon.

[amt] 16/3/2020 09:13

Gotta fly. I mean the share price is likely to follow the rest of the market down. There are now many stocks which if there is a recovery would double or perhaps treble within months. That can't happen with Gresham because its on such a high valuation.

[gottafly] 16/3/2020 08:30

amt not sure what you mean 'share rout soon'.

The point I was trying to make is that the N1 forecasts seem at variance with the management view (Number 1 in the market is 3/5 years) and in fact their own wording in their most recent note which is "GHT is amongst the fastest growing UK software companies and has every possibility of achieving its aim of becoming the number one global player in its core business areas."

To me it simply does not stack up and again underlines the lack of public domain information available for GHT.

[amt] 16/3/2020 08:11

Trouble is the valuation takes a few years of very strong growth into account. Also surely its going to follow the share rout soon.

[gottafly] 13/3/2020 13:16

Had a listen to this and much of what IM said was also stated at the PI presentation on Tuesday. IM again stated that the Clareti product set - now three streams - has cost £30 million (self funded and no debt) to develop, a number he seems very proud of!

At the PI presentation he stated that the work/effort/investment put into Clareti, to make it the class leading solution, was a barrier to entry for those wishing to match or beat the GHT offering. As I stated on a previous note, IM even classifies fellow Fintech Smartstream as a legacy vendor!

I think that GHT has very serious upside potential but my concern remains as how quickly GHT can deliver growth. Given the £30 million development price tag, apparent leadership and barrier to entry, is a 30% growth rate really acceptable given the low start point in terms of current market share?

GHT management are very confident (a good thing of course) but I think life is a bit too comfortable as regards growth rate. Quite simply I think they have set the bar too low.

In the medium term - 3/5 years - they intend to be number 1 in Data Regulatory & Control. This market is apparently worth $500 million a year, so greater than 25% would mean circa £100 million. With Clareti revenues currently £15m this is a six fold increase. IM also states his confidence in the other two business lines - Regulatory Solutions and CMP - so assuming these are also successful (why wouldn't they be) then this would add significantly to overall revenue. To me something simply does not add up!

As always dyor but given these troubled times GHT looks a brilliant investment choice rather than high risk.

[jadeticl3] 13/3/2020 11:31

QANTAS, this is a very interesting discussion you have pointed us to. IM comes over as a person who knows what he is talking about, and is able to point out the quality and need for what GHT are selling. It certainly makes me feel more comfortable as a shareholder, even if I had hoped the recent results would encourage a rise in share price, which did not happen—-although clearly other factors were dominating the market!

[qantas] 13/3/2020 09:36

This week Ian Manocha, CEO, sits down with
@IBSIntelligence
for a Q&A on the challenges and opportunities of being a listed #fintech in an industry undergoing transformational change. Listen to the podcast above

Please do your own research as always.

[gottafly] 11/3/2020 11:51

Interesting to listen to the PI presentation yesterday, it can be found here by the way - hxxps://www.greshamtech.com/hubfs/gresham_investor/IR%20Presentation%2010%20March%202020.pdf?hsLang=en-gb

You would not expect there to be any new revelations because clearly GHT need to stick to the public domain script. The key thing that I got out of it was the confidence (for the future) and the high satisfaction (perhaps relief) regarding the 2019 results - there was clearly a good feeling about a job well done.

The financial side was covered in some detail and they now feel that the Clareti business will be cash positive by the end of 2020, so the reliance on non core revenue/activity will be history. IM seemed very pleased and proud that the Clarity product set had all been funded 'internally' and that there was no debt, he said that this made GHT very different from a normal debt ridden Fintech. So financially they feel in a very good place.

Clareti has now expanded into three principal business lines (with the hint of more to come in the future) - Data Integrity & Control, Regulatory Solutions, Cash Management & Payments (B2). IM was very confident that GHT would be the number one (greater than 25% market share of $500 million market) in Data Integrity and leaders/major players (perhaps even number one again) in the other two.

IM explained that the organic growth strategy was two fold - to develop (up sell/cross sell etc.) their existing client base of 100 plus and to win new clients by replacing their inferior/inefficient legacy systems (apparently GHT consider even Smartstream to be legacy!). So the inference was that, whilst legacy competitive wins will happen and will hit the headlines, much of the future growth will come from already established Clareti customers. It is difficult to explain just how confident IM was with this approach!

IM also stated that although organic growth was the immediate focus, that GHT would potentially seek further complimentary acquisitions. So I reckon that if 2020 shapes up as GHT expect then an acquisition will be on the cards later in the year (my guess is they probably have something in mind already). I am not the greatest fan of acquisitions (I still think B2 was a contributor to the 2018 blip due management bandwidth) but assuming that the organic growth is strong then there should be limited downside.

As always DYOR


......

jadeticl3 - as regards shares traded yesterday - 18 trades and a decent volume (350k) and an share price increase. Pretty good given the overall market background.

[jadeticl3] 11/3/2020 09:34

How very odd!My search shows that since good results were issued yesterday no one has bought these shares. Is that a fact or is my system not working?

[gottafly] 10/3/2020 12:24

Well have got my confirmation of the GHT conference call for the private investors meeting later today, will be interesting how many PI's decide to attend given the ease of doing so.

The presentation and results are pretty detailed so much to think about and analyse. The general mood music though is very positive, dare I say even bullish.

N1-Singer states in its latest note:-

GHT is amongst the fastest growing UK software companies and has every possibility of achieving its aim of becoming the number one global player in its core business areas.

tacticaltrader notes that under SOTP analysis there could be a 40% upside.

On the downside (short-term hopefully) we have the market 'melt down' re Corona Virus and oil prices. However, GHT is a long-term play and this should just be a blip.

I am not a fan of the GHT dividend but an uplift of 50% is again a positive message.

It seems that Ken Archer has decided to stand down having given 10 years great service, I for one would like to thank him for his efforts, to my mind he has been instrumental in GHT's survival and reincarnation. Ken will be a hard act to follow.

One interesting admission is that the B2 Group (now apparently an essential/vital part of the CTC offering) did not perform as well as expected in 2019 - "B2 Group's growth during 2019 was unfortunately curtailed by a licence cancellation from a large client unexpectedly winding down their business". So the figures could have been even better.

Bring on the PI's meeting!

As always DYOR

[4-10] 10/3/2020 12:01

Holways Firm's comments...

Gresham delivers excellent results
Jon C Davies, 07:52, 10 March 2020
Gresham Technologies, the specialist provider of real-time, transaction control and data integrity solutions to the financial services sector, has published its full year results highlighting the company's strong performance during 2019.

As indicated in its 6 January trading update (see: Gresham Technologies closes out 2019...) Gresham enjoyed a 30% increase in group revenues to £25m, with total revenues derived from the company's flagship software, Clareti, up 31% to £15.5m. The results highlight Gresham's successful move to subscription pricing, with Annualised Recurring Revenue (ARR) for Clareti up 30% to £9.5m in 2019.

Gresham has been performing strongly of late and reported revenues up 36% at the end of H1 (see: Gresham reveals an excellent start to 2019). The company secured several new Clareti customers during 2019, with 6 of these coming in the second half, including a major US win, at one of the world's largest alternative investment management firms.

Gresham reported adjusted EBITDA for FY19 up by more than 300% to £4.1m whilst the group closed the year debt free, with a cash balance cash at £9.6m. Gresham's management has good reason to be very pleased with the company's achievements during 2019 and optimistic about its prospects for FY20.

[double double] 10/3/2020 09:57

On a forward pe of 40 for 2021 forecasts, I think its ok for now should improve over time as the balance between growing revenue and expenses widens.

[amt] 10/3/2020 09:44

After some assessment I decided to sell out. The rating is very high. Pe of perhaps 50 is taking a lot of growth into account. Any slip up and the share price could drop dramatically. There are so many other bargains around.

[tacticaltrader] 10/3/2020 09:15

FY19 finals – strong sales growth and cashflow 31% y/y Clareti growth, of which Clareti s/w: +39%, and recurring: +55%. ARR now £9.5m. Whichever way we view FY19, numbers are impressive. This was achieved notwithstanding a focus on driving recurring Clareti sales – a process that might otherwise dampen immediate progress. Cash performance was also strong; ‘cash EBITDA’ (EBITDA less capex and leases) now positive at £0.1m (PY: £-2.3m). FCF: £4.3m, PY: £-0.8m. Cash £9.6m. Our forecasts are left essentially unchanged. Opportunities aplenty These strong final results see Gresham return to the sector leading revenue CAGR of the past five years (+59%). The company has established a track record of winning market share in small/complex deals which has now extended to winning large ‘core’ deals with leading multi-national banks and investment managers. Importantly, this includes replacing incumbents (Smartstream and FIS). We expect these referenceable deals to generate continued market share gains going forward. Furthermore GHT is making progress beyond Data Integrity and Control, in areas such as Regulatory and, more exciting still, Cash Management. Here, through ANZ, GHT has a trusted partner to develop new banking services in FY20. Valuation We apply a peer group’s average multiple (6x EV/Sales) to derive a fair value for Clareti. We apply a 4x multiple to Solutions and Contracting AOP. Such an SOTP analysis suggests some 40% upside.

[tacticaltrader] 10/3/2020 09:09

FY19 was an excellent year, characterised by accelerating sales growth (+30% y/y) to
£25m and a swing to positive cash EBITDA (both in line with upgraded FY19 estimates).
Highlights include the two land-mark contracts wins with Global Tier 1 banks. They
represent a significant step-up in deal value for GHT, reflecting the global nature of both
implementations and further, the broadening into ‘core’ (i.e. cash and securities
processing) reconciliations management. Importantly, GHT displaced two large
incumbents - providing further evidence the company is winning share in a >$300m market
opportunity. GHT is amongst the fastest growing UK software companies and has every
possibility of achieving its aim of becoming the number one global player in its core
business areas.

[warranty] 10/3/2020 08:24

Terrific results, just can’t see why this isn’t much higher this morning even with the Corvid-19 issues. Maybe it will rise after the presentations, it certainly deserves to.

[amt] 10/3/2020 07:29

Excellent results with bullish outlook. Doesn't seem to be any Coronavirus impact so far.