Kape Technologies Share Discussion Threads

[qs99] 05/2/2020 12:47

Looks like £2 coming sooner rather than later then....DYOR

[qs99] 05/2/2020 11:36

Looking very good, still over a month to the results.....nicely building to £2++ GLA

[shanksaj] 05/2/2020 11:17

John, that sounds about right to me. I've never had so much invested in one share before as with Kape. In addition, if it gets to fair value quickly then there is the overshoot to add in on top.

[investorsiba] 04/2/2020 16:12

On fy results what are people's target prices ?

[suetballs] 04/2/2020 14:43

A small top up for me.
Suet

[nobilis] 04/2/2020 12:22

0 0 0
Notice of Results

Mpac Group plc, a global leader in 'Make, Pack, Monitor and Service' high speed packaging solutions, will be announcing its preliminary results for the year ended 31 December 2019, on Wednesday 4 March 2020.

For further information, please contact:

[johndoe23] 04/2/2020 12:09

By my rough calculations, based on next year's EPS, any bid would have to be north of 250p, more likely 300p. This would imply a PE of 18 times forward earnings...

[essentialinvestor] 04/2/2020 12:00

Will it be taken out before it has time to reach it's full potential?.

[bramcych] 04/2/2020 11:12

This has started to move on the next leg up - it remains hugely undervalued.

[tomv33] 03/2/2020 17:13

Considering you joined last week and the CEO of dev sold 50million shares recently I wouldn't recommend it...

[jayminpatel1] 03/2/2020 16:04

Guys huge TIP get into #DEV is at 2.2p and only listed last year and got to 18p highs Massive massive buy as will do the same as BIDS and flyGet on board now!!!!

[gswredland] 03/2/2020 15:50

Thanks for posting that.
Hoping for further weakness to add

[rivaldo] 03/2/2020 11:30

Now that the new issue of SCSW is out, it's probably OK to repeat what SCSW had to say about KAPE in their previous issue in their tip update.

They noted that at the then 148p KAPE were "D-I-R-T cheap" given the new 15.6c EPS forecast for this year.

The closing summary of the strategy re the PIA acquisition is important:



"Kape - 70% eps accretive deal

American company Private Internet Access literally invented the business of digital privacy, says Kape’s chief executive, Ido Erlichman. When it launched in 2009 nobody had really heard of VPNs (or Virtual Private Networks, when it goes by its full name) but nowadays VPNs are getting more mentions as online security and privacy come under scrutiny. The VPN market is already worth c.US$24bn but is expected to grow 50% by 2022 and Private Internet Access is a top three player.
Having seen the news release flash up on my screen at 7am that Kape (KAPE; 148p) was buying Private Internet Access, it took me just three minutes to contact the company’s advisors and ask whether it was possible to meet Erlichman and finance director Moran Lauder. Less than four hours later I was sitting in an office in Piccadilly with them. In the light of the deal brokers have already lifted their FY20 forecast earnings by 70% from 9.2 cents to 15.6 cents. Now on a prospective PE of 12.2 the shares are D-I-R-T cheap.

Kape is, of course, an old friend to SCSW, a main recommendation in April ‘18 and also a constituent of Growth Portfolio 3. Since Erlichman joined four years ago he has moved Kape squarely into the market for VPN privacy software. A young guy with 2m shares issued at 27p when he joined, he is clearly hungry to make his first fortune.

Cyberghost was bought in March 2017 and was mostly a free VPN service at the time but was rapidly transformed into a paid for service using savvy online marketing. This was followed by Zenmate, which was lossmaking but rapidly assimilated into the existing structure to leave a very profitable business. But these were just a dress rehearsal for the acquisition of PIA, which now makes digital privacy overwhelmingly the largest part of its operations.

As I have explained in the past, corporates and individuals might typically use a VPN service when they wish to anonymise their Internet activity and keep a computer secure whenever it’s connected to public networks such as at Wi-Fi hotspots (eg. coffee shops) where there is a risk of hackers infiltrating the unsecured network and using it to collect personal details or sensitive login information. A VPN product will replace a user’s original IP address with another IP address from the network making it impossible to track online activity. Because VPNs use a combination of dedicated connections and encryption to generate virtual peer-to-peer connections, even if snoopers do manage to siphon some of the transmitted data, they’d be unable to access it on account of the encryption. Private Internet Access (PIA) was one of the really early companies in the VPN area. Kape has paid US$127.6m for it, to be satisfied by US$52.9m in cash, 42.7m new shares and the repayment of US$32.1m debt. Kape’s largest shareholder, UniqMind (a vehicle for Teddy Sagi), has provided a US$40m short-term loan to ensure the deal gets completed and post the deal its interest falls from 73% to 55.9%.

In M&A circles they sometimes talk of the “winners curse,” where the benefits mostly flow to the shareholders of the acquired company and the buyer is left with an overpriced turkey, and many deals then fail in the post-acquisition phase due to poor pre-planning and integration. Not a bit of it here. PIA’s co-founders and shareholders, Andrew Lee and Steve DeProspero, are taking less than US$5m cash upfront but are rolling up most of their consideration into Kape, and each ends up with a 10.4% stake. They also commit to staying for three years to grow the business. Erlichman has also already completed two VPN deals so knows exactly what is involved integration-wise.

PIA generated revenues of US$47.4m and had an adjusted EBITDA of US$14.7m in FY18. This compares to Kape’s revenue and EBITDA of US$52.1m and US$10.4m, respectively, in the same period. PIA comes with 1.2m SaaS users (half in the US; 80% of customers with it over two years), so you could say Kape is valuing each user at, say, US$100. But this is the wrong way to look at it, says Erlichman, as there is deeper strategy.

First, Erlichman says there is now a fairly straightforward process of removing geographical overlap in the global network of servers as well as duplicated costs in the first year. PIA owns a network of 3,335 servers distributed across 30 countries globally and CyberGhost has 5,700 across 89 countries. Overall he expects to save up to US$4.5m within a year. Consequently, the enlarged group is expected to generate consolidated proforma 2020 revenues of between US$120-123m and adjusted EBITDA of between US$35-38m - an outstanding deal that has clearly galvanised Kape’s prospects.

The PIA brand is so strong that it will now be adopted as the name for the enlarged business (Zenmate will probably be dropped).

Second, the strength of the brand is exemplified by the fact that, to date, PIA grew by word of mouth by relying on its high profile amongst online security bloggers and vloggers as well as free google search results. This compares to the affiliate model Kape uses where it might spend US$100 to get a new customer but only recoups US$85 in the first year, which depresses year one profit. Kape capitalises part of the cost and writes it off over 22 months so cash lags profits a little. With PIA there is no such associated cost of acquisition as there is no advertising spend, so everything drops to the bottom line quickly. It has 90% gross margin and 30% ebitda margin.

Third, applying Kape’s high quality digital marketing channels is expected to place PIA on a stronger revenue trajectory. PIA grew sales by 18% last year versus Kape’s c.40% reported VPN growth.

Finally, PIA also comes with additional privacy products to add to the technology stack. These include 1) Plus Ultra – software that speeds up internet connections; 2) LibreBrowser - a completely private browser; and 3) Private.sh – a private and encrypted search engine based on proprietary blockchain technology. It has the look of a business set to massively surprise on the upside in 2020.

Even at 200p the PE would only be 16. Grab it with both hands."

[tomv33] 27/1/2020 11:01

Well I'm sure it will go up, give it a week or so unless we all start eating bats and mice

[blackfinance] 27/1/2020 10:57

Tomv33 - I would imagine so. Markets are pretty fraughty at the moment anyway, so any excuse. Difficult to say how it will pan out, but not helpful for the China economy that's for sure.

[tomv33] 27/1/2020 10:49

Corona virus causing fall?

[gswredland] 27/1/2020 07:59

Thanks Rivaldo

[sjohns14] 27/1/2020 07:24

Arden Partners re-iterates 'Buy' rating. Target price 208p.

[wton1] 25/1/2020 08:09

Above post Spam

[tomv33] 24/1/2020 19:00

Is that your prediction ONJohn

[investing2retire] 24/1/2020 12:57

Yep, precisely @BlackFinance. I also got stopped out on FIN @105 this morning. but was always a high risk trade. got in at 1.29 on 10/01

[blackfinance] 24/1/2020 11:25

Thanks Rivaldo - good to see Kape doing well. On the flip side I bought into FIN last week post the Travelex debacle.....only for them to announce today some very dodgy dealings pre IPO.....hey ho, you win some, you lose some. For what it's worth my strategy is to buy in small and add as the prices moves up, so I was somewhat protected from todays fall (2000 shares at 1.36 last week, sold at 98 today). There is not a great deal anyone can do when a company pulls a stunt like that, but it does demonstrate the importance of having a clear buy/sell strategy.