Pelatro Share Discussion Threads

[rivaldo] 28/6/2019 11:32

Given the relatively small free float here, it's surprising not to see the price rising much with the amount of buying which has been coming in.

There's presumably a decent-sized seller out there dripping out stock. Hopefully when the overhang clears the price will rise quickly back to 90p+.

[mikeh30] 25/6/2019 14:20

As Pelatro grows and gains recognition for its software the more telcos will sign up, debtor days will decrease further and the snowball effect will continue. They will no longer have to 'prove their software solution works'All laid out in their presentations

[mikeh30] 25/6/2019 14:17

Rivaldo - like they have mentioned in their admission doc and several presentations the nature of their software and contracts they have unique visibility into future sales. Like mentioned before there maybe telcos using the software now on the trial periods which will then be announced as contracts when signed up which will add to the visibility

[rivaldo] 25/6/2019 14:08

After the March contract win, visibility was "approximately $6m" for this year. I assume change requests etc then increased this to $6.3m, and that the $1.5m contract win a week ago is additional to this as otherwise the maths doesn't work. Presumably the $6.3m was as at the end of May, in which case PTRO is now at $7.8m (or say $7m+) for this year.

I agree with rgmgo's point above - if PTRO were to achieve only 11.4c EPS this year, i.e 9p EPS (compared to the forecast 15.4c), then at 80p the share price would still look very cheap, especially given the growth potential.

Perhaps Finncap should be underplaying this year's growth, allowing PTRO to over deliver, rather than building in this expectation of fast growth, which is welcome and certainly achievable, but could be derailed by just one mis-step.

EDIT - mikeh30, sorry, my post crossed with yours.

[mikeh30] 25/6/2019 14:04

Bullish statement.No danateq payment dueHealthy cash position They are clearly focused on what needs to be done including reducing debtor days and increasing cash collection. Cross - selling here is key as the software is already in place. Pure profit for any cross sells. If you look at the recent mello presentation all 18 of the contract wins have 1 part of their software offering. Cross selling will exponentially increase profitHigh margins achievable here and a doubling of pre-tax profits year end will be achieved.

[rgmgo] 25/6/2019 11:00

Those are good points daz & it would be great if anyone could get a clarification on the revenue recognition on the new contract. Ex the recent win, I'm assuming that change requests are the key to delivering the current year forecast as in theory they are the more predictable revenue stream and there would typically be a shorter timeline to revenue recognition. Management previously indicated that it hopes to get full visibility of 2019 revenues within Q3, which is later than last year, but one major early contract win had a disproportionate impact then as the company was much less diversified. IMO hitting 2019 expectations is clearly an important issue but as (hopefully) a long term holder I think there is enough slack in the earnings multiple on a reported, or cash expensed basis, that a small miss wouldn't undermine the LT valuation case, although granted it certainly wouldn't do the share price any favours short term. Indeed, you could argue that the rapidly broadening customer base and new product momentum is more indicative of long term earnings power than a specific revenue figure for 2019. A big miss might however change that equation.

[daz] 25/6/2019 10:20

It's worth mentioning that PTRO only recognise revenue for a new customer, when the installation has been completed, which can take 3 - 4 months. Working back from that, it means that new customer wins have to be signed in August to contribute to the full year figure.
Based on that the increase in visible revenue from $5.2m in the Full Year results in March to $6.3m now, at the end of June, doesn't look that good.
It looks though that the new contract win and change requests aren't included in the new $6.3m figure but it would be good to confirm this.

Is anyone going to the AGM, who could ask for clarification?

[rivaldo] 25/6/2019 09:22

Finncap retain their 125p target price and 15.4c EPS forecast, and conclude as follows:

"Undervalued:

The share price has bounced from its lows but remains very cheap. The finnCap Tech40 and Next50 indices are currently trading on average forward P/E multiples of 23.9x and 18.7x respectively. In contrast, Pelatro is on just 6.6x FY 2019 while consistently profitable, cash generative and demonstrating high growth (turnover jumping 161% in FY 2017 and 95% in 2018). We feel there is much more value to come."

[rivaldo] 25/6/2019 07:31

Very confident AGM statement as hoped. In particular, due to H2 weighting the first Danateq earn-out is not payable, so those concerns can be laid to rest.

Onwards and upwards from here - with $6.3m revenues already visible, the remainder required to achieve expectations of $10.5m should be relatively easily attained given we're not even halfway through the year yet.

[mfhmfh] 21/6/2019 09:50

waiting for the AGM statement on Tuesday 25th June. Positive statement should push us back towards 90p at least. IMHO.

[rivaldo] 21/6/2019 09:23

It's beneficial imo for a small cap like PTRO to get as much good publicity as possible, including ST's tip yesterday, given the lack of coverage for small caps elsewhere.

I'm sure some of ST's followers may exit short-term. That would be their loss imo. But equally a number may decide to stay in longer, and overall PTRO's investor audience will have increased.

[davr0s] 20/6/2019 19:12

Let's not have an ST pump as it will just attract a lot of hot money that will exit at the first sign of weakness

[rivaldo] 20/6/2019 13:31

Excellent - thanks rimau1. Good to see PTRO's undervaluation being recognised.

[rimau1] 20/6/2019 13:12

Nice ST write up should bump this up, emphasises the crazy 6.5 times valuation.
Contract momentum is clearly building.
“When Pelatro announced a £700,000 award in late March with Advanced Info Services, a member of the Singtel Group and the largest mobile network operator in Thailand, this increased its revenue visibility to $6m for the 2019 financial year. That’s as much as revenue as the company reported in 2018. The latest award improves visibility even higher still. Furthermore, Mr Menon notes that “we are benefiting from increasing levels of repeat business and cross selling opportunities from existing clients, underpinning the directors’ confidence as we close the first half of the year.”

That confidence is based on Pelatro lifting annual revenue from $6.1m to $10.5m to double annual pre-tax profit to $6m this year, as analyst at house broker finnCap predict. The projected eye-catching profit growth not only highlights the operational leverage of the business model, but also the high gross margin the company’s software commands on its sales.

On this basis, expect earnings per share (EPS) of 15.4¢ (12p), implying that the shares are being rated on a price/earnings (PE) ratio of 6.5, a massive discount to finnCap’s Next50 group of technology companies which trade on a forward PE ratio of 19. That huge valuation discrepancy to peers is not only unwarranted, but with contracts building and the bid pipeline strong, then an imminent re-rating looks on the cards driven by the step change in Pelatro’s financial performance this year. Offering 50 per cent plus upside to my 120p target price, Pelatro’s shares rate a buy.

[westofengland] 18/6/2019 12:37

Thanks, Rivaldo. As is often the case, you have your finger on the pulse.

[rivaldo] 18/6/2019 11:21

Finncap reiterate their 125p target and summarise:

"Recent share price weakness has left the stock significantly undervalued
on the fundamentals and with the steady flow of contract wins this year,
investors can be ever more confident in its market expectations. The current
forward earnings multiple of under 6x is woefully inadequate for such a high
growth business with global prospects and with this ever-improving visibility we
expect an imminent recovery in the valuation.

Undervalued: The finnCap Tech40 and Next50 are currently trading on average
forward P/E multiples of 23.6x and 19.7x respectively. In contrast Pelatro is trading
on just 5.8x FY 2019 while consistently profitable, cash generative and demonstrating
high growth (turnover jumping 161% in FY 2017 and 95% in 2018). We feel this is
deeply undervalued and due a revaluation."

[rivaldo] 18/6/2019 07:22

Excellent news - in particular that this is a new client, "a large telco in Asia", giving the opportunity for more cross-selling etc.

Encouraging comments also from the CEO re increasing repeat business etc and confidence in trading going forward.

[mikeh30] 18/6/2019 07:12

$7.5m revenue already achieved. Full year forecast is only $10m.Not even half year yet.'Significantly ahead of market expectations' for results

[rimau1] 18/6/2019 07:05

Nice contract win and guiding to in line results ahead of the AGM next week. This has drifted too low on no news.

[mikeh30] 17/6/2019 11:23

https://www.pelatro.com/products/mviva-gamification-and-survey-solution/Updated website and new products

[jonbaker1] 13/6/2019 12:52

I agree with rgmgo. Pelatro seems to be benefiting from a well thought through contract with tight terms, like in the case of Scisys.

[jonbaker1] 13/6/2019 12:45

Well, I am stitching a few pieces together. They announced 3 contracts in 2019 and none of them seem to be related to Danateq, they have stated multiple times in events like Mello that revenue is weighted towards the second half of 2019 with the first year with Danateq getting over in July. The most important bit is the Contingent Consideration section in the 2018 Annual Report which is on the company’s website. The potential payment due within one year, which is the 1st year with Danateq, is $298,000. As per the contract, the potential payments are $2m and a further $1m. If the company is stating in its Annual Report that it is expecting to pay only $298,000, to me that clearly means it does not believe any payment will be due in the first year.

[westofengland] 13/6/2019 12:25

I am pretty sure that Rivaldo looked into this and didn't believe any payment was due.

[sharw] 13/6/2019 11:47

See also "Contingent Liabilities" on p26 of the annual report here:

[rgmgo] 13/6/2019 11:34

Woops, typed wrong figure for next year, now corrected to $1.141mn