Kape Technologies Share Discussion Threads

[suetballs] 21/9/2021 12:32

Well done Dippie - and a new car - excellent.
Suet

[bluntnib] 21/9/2021 11:54

Wait, it gets better. The also own Private Internet Access. Lo and behold, it's 3rd "best" on Kape-owned vpnmonitor after Kape-owned ExpressVPN and Kape-owned CyberGhost. I could delve further but can't be bothered - seen enough already. What ARE they playing at?

[iandippie] 21/9/2021 10:53

I am up 100%, have sold half my holding for a free ride with the rest, and have an MX-5 RF sitting on my driveway thanks to my KAPE profits. How's that for a cogent argument ;-)

[bluntnib] 21/9/2021 10:44

Does no-one have a cogent argument disproving my points? Or would you rather just blind yourself to facts?

[adamb1978] 21/9/2021 10:23

bluntnib added to filter. I encourage others to do similarly and not give him the oxygen he needs

THe Shore Capital are in-line with the guidance from the company

[bluntnib] 21/9/2021 10:10

Another bullish note out today, this time by Progessive Equity Research. They describe the acquisition of ExpressVPN by the company that "independently" reviews it as "cultural alignment". The English language is exquisite. Their disclaimer is rather more prosaic: "KAPE TECHNOLOGIES IS A RESEARCH CLIENT OF PROGRESSIVE". Ah...

[bluntnib] 21/9/2021 09:56

By the way the number 2 recommended product on vpmonitor is Cyberghost which is owned by... you guessed it...Kape. Fancy that!

[bluntnib] 21/9/2021 09:47

Which "institutional investors" are they? Can't see any listed on Sharepad but that might be out of date

[bluntnib] 21/9/2021 09:38

rivaldo - Shore Capital is the paid 'house broker' so they would say that wouldn't they? In the same way as the "independent" vpnmonitor is the house website! All very incestuous, no?

[bluntnib] 21/9/2021 09:35

Disagree - isn't the whole point of this forum to highlight risks?

[iandippie] 21/9/2021 09:28

I'f you don't believe in Kape, haven't you got better things to do elsewhere?

[bluntnib] 21/9/2021 09:03

Just to add to the above: the vpmmonitor site itself has the cheek to declare "Honesty and Transparency are two core values of vpnMentor" whilst failing to mention it is owned by the product it recommends above all others. Unbelievably, it then inludes a Paypal donation link - to give the impression they are just a bunch of hard-scrabble toilers providing a charitable public service rather than paid shills. To borrow a phrase, vpmonitor uses about some of ExpressVPN's cheaper competitors this is all very "shady".

[bluntnib] 21/9/2021 08:41

Call me old-fashioned, but isn't there a conflict of interest in a supposedly independent VPN comparison and review website being owned and run by the company which owns ExpressVPN - the product it is "reviewing"!? I would be slightly less concerned if they were at least transparent about this issue but Kape's public statements pointedly omit the name of the website - vpnmonitor - mentioning only the wesbite's owner and content provider Webselenese. The Webselenese website also hides the name of its flagship product. Why is that? Could it be that if visitors to vpn monitor were aware of who owns the site, they might find it a bit rum that the top recommended vpn is ...wait for it...drum roll... ExpressVPN! Kape probably thinks they are being very clever but the smart move would be to be upfront with customers and the markets about this. Given that customer trust is at the heart of a privacy and security company, all it would take would be one newspaper expose for this to crash and burn.

[gswredland] 21/9/2021 08:34

Thank you guys. It is so good to have an informative board on here rather than squabbles!

[rivaldo] 21/9/2021 08:21

Cheers gleach23. I suspect ST will be raising his 500p target once again this year.

Progressive Equity Research have issued a new note today:



They've upgraded 2022E revenues "by some 146%, with Adjusted EBITDA up 84% from $91.0 million to $167.7 million."

With 41c EPS now forecast next year, KAPE's P/E remains extremely good value imho.

This section is noteworthy:

"What’s in it for ExpressVPN ?

Kape has, for many years, been expanding through both acquisition and organic delivery.This ExpressVPN deal is, by some margin, the largest deal in Kape’s history. The attraction for Kape is clear – and we understand that the attraction for ExpressVPN is related to Kape’s existing and historic success.

▪ Both companies have been highly successful at executing on their growth strategies, both (especially PIA within Kape) already benefit from the flexibility of a largely-remote workforce, and both use offshore delivery (in the Philippines) for customer support.
▪ Crucially, Kape already provides a multi-product offering and platform, which could be quickly brought to bear on the large ExpressVPN customer base (and through its strong distribution network). This should allow for an expansion of the ARPU achieved by both businesses, and for further organic growth over time.
▪ We understand that, through a combination of these factors, as well as a clear cultural alignment, Kape was able to persuade the ExpressVPN founders and shareholders that a combination was the logical move.

It is perhaps for these reasons that Kape has been able to negotiate what appears to be a very good price – paying a low-double digit EBITDA multiple for a business with genuine global scale, with a very attractive historic growth profile and with significant ongoing market opportunity.

Summary and conclusion

This deal is clearly a very major step for Kape. The group is becoming a material player on the world stage for personal security and privacy. The move is not without risk – the consideration is partly deferred but fixed, and the sums payable are considerable. Nevertheless, the expansion in the group’s scale and the opportunity for cross-sell and up-sell, as well as logical cost reductions, should allow the business to easily fund the deferred element of the consideration and benefit in terms of strong cash flows and the ability to reinvest in products, as well as providing a good long-term opportunity for investors.

We take additional comfort from today’s strong H1 delivery, and look forward to further announcements as the transaction moves through the antitrust procedures and towards completion. We may need to adjust our forecasts again, once deal timing is clearer and as additional detail is available, but in the meantime we take comfort from the ongoing expansion in the digital security market and Kape’s clear ambition to expand and extend its role in the market."

[gleach23] 21/9/2021 08:03

Simon Thompson's write up from last night appears to be in the public domain, so copied below -

Over 40 per cent of ExpressVPN’s users are based in North America, which scales up Kape’s global offering, and almost half its 290 employees are R&D engineers, thus adding valuable expertise. There are also material opportunities to cross-sell and generate cost savings by combining the two groups which will service 6m paying customers. ExpressVPN is fast-growing, reporting revenue of $279m and cash profit of $74.8m in 2020, both metrics up by more than a third year on year.

Kape is now forecast to deliver cash profit of around $172m in 2022, up from $74m expected in 2021 and $38m in 2020. When I included the shares, at 47.9p, in my 2017 Bargain Shares portfolio, Kape was making cash profit of $8m. Given the structure of the deal, analysts expect earnings per share (EPS) of 41c (30p) in 2022, implying 61 per cent year-on-year growth. On a forward price/earnings (PE) ratio of 13.8, the rerating has further to run.

Kape’s earnings-accretive game-changing acquisition

Earnings-accretive $936m acquisition of ExpressVPN
Cost savings of $19m targeted in 2022 and $30m annualised from 2023
Guidance cash profit of $166m to $172m in 2022 on revenue of $610m to $624m
Forecast earnings per share (EPS) of 41¢ in 2022
The $936m Kape Technologies (KAPE: 415p) is paying for ExpressVPN looks a fair price as it represents 10.8 times 2022 cash profits (7.8 times after targeted cost savings and synergies), a deep discount to rival Avast’s recent take-out price of 16 times cash profit.

The funding structure is sensible, too, as the consideration is being settled by the issue of $237m new ordinary Kape shares to the vendors, $354m cash on completion (financed by a placing and retail offer at 337.5p), with a further $172m cash payable on both the first and second anniversaries of the deal. Importantly, deferred consideration can be fully funded from Kape’s operational cash flow and by using undrawn lines from its existing credit lines. Net debt is expected to decline from three times cash profit on completion to 1.5 times by the end of 2022.

Factoring in $19m of targeted cost savings in 2022, the £1.2bn market capitalisation group is being valued on an enterprise valuation to cash profit multiple of 11 times. That’s a low rating for a group run by a shrewd management team who are proving adept at increasing its customer base, cross-selling products, successfully integrating acquisitions and entering new lucrative revenue generating agreements.

Kape’s share price has risen by 35 per cent since I last suggested buying the shares, at 303p (‘Bargain shares: Building momentum’, 26 July 2021), and the holding has produced a 763 per cent total return on my 2017 entry point. I raise my fair valuation by a third to 500p to reflect a target enterprise valuation of 13.4 times 2022 cash profit estimates. Buy.

[valueye] 21/9/2021 07:56

Why do you think they trade at a discount ? Avast (not as fast a grower) taken out at c. 17x EBITDA yet KAPE at sub-14x or so

[the white house] 21/9/2021 07:40

As the man said...a truly exceptional year...

[rivaldo] 21/9/2021 07:31

Excellent results, with KAPE confirming they remain on track to meet the heavily upgraded expectations.

As Simon Thompson wrote last night, KAPE are on a forward P/E of only around 13 or 14, which is a very, very large discount for its sector.

[igoe104] 21/9/2021 07:19

Excellent allround numbers, I'll be looking forward to the presentation later, it will be interesting to see what the guidance is going forward...

[adamb1978] 20/9/2021 21:15

Thanks toptomcat. Sounds like thats a next 12 month target given the basis of valuation. More gas in the tank beyond that!

[lsoc85] 20/9/2021 18:59

The last time they put out that article the share price doubled within the year.

The writer's conclusions are completely at odds with the strength of the title.

And I don't see the acquisition of Webselenese as any different to Flutter Entertainment owning Oddschecker - it pays to know what the competition are doing.

It's a strong hold for me.

[toptomcat] 20/9/2021 18:55

Tonight ST in IC raises fair valuation by a third to 500p to reflect a target enterprise valuation of 13.4 times 2022 cash profit estimates.

[martinc] 20/9/2021 17:31

ZDNet aren't over impressed:
hxxps://www.zdnet.com/article/trust-but-verify-an-in-depth-analysis-of-expressvpns-terrible-horrible-no-good-very-bad-week/