Pelatro Share Discussion Threads

[davr0s] 25/11/2019 19:10

Still effect of results flowing through - share is under distribution now

[sporter1402] 25/11/2019 17:47

Any reasons for recent price drop, no news is bad news?

[cordwainer] 21/11/2019 15:16

I hope that comparing with this time last year is not too telling, but there were already several contract wins announced since the interims whereas this year .. nothing.

[mfhmfh] 18/11/2019 13:37

x 3 big buys today

[paleje] 25/10/2019 15:19

If they get the H2 revenue they expect to be able to get, then eps of 12p for the current year puts them on a silly PE ratio and the share price will move sharpish. Even if they fall a bit short, with the growth potential and high margins the risk discount seems overdone. I hope.

[cordwainer] 10/10/2019 15:23

I hope you're right rivaldo, I was in at 80p before the half-year report trashed the price. Still very high risk with increasing cost base imho. Cash situation looks highly uncomfortable if I'm reading it right - some of that 'pipeline' needs to be actually in the bank during H2.
On pushing revenues back, into H2 or beyond, it seems many have interpreted that as a profit warning and I don't blame them for selling. Being slow to react, I'm resigned to see how things play out.

[rivaldo] 10/10/2019 07:53

Penpont, thx for the comprehensive IC article. Certainly looks like the bounce is gathering strength.

Finncap seem very confident about the H2 weighting being met. Given $6.3m of visibility, $4.2m is necessary from a $9.2m pipeline, with comfort hopefully being provided in mid-November.

IMO Finncap (and presumably PTRO) should have set their forecasts lower at say 12c EPS this year, which would still have been a good rise from last year's 10.1c EPS.

Always better to under promise and over deliver.

As it is, 12c EPS this year would be a very respectable achievement. Against that stretching forecast it would be deemed a failure, yet it would make the current share price look very cheap indeed.

[westofengland] 09/10/2019 10:18

Penpont,

Thank you for your authoritative update on the business. I was unable to attend the meeting with Subash and Nic and this is a most useful update.

Looks like the shares are seeing some traction so maybe there is a good new base from which to move forward.

[cordwainer] 02/10/2019 17:57

ppl, how much do we really know about the software itself, is it a bit too bespoke while disguised as off-the-shelf ? is there enough of USPs to create a 'moat' with sales momentum ?
I'm aware there's a number of other service companies to telco's with global reach but I think they're either consultancies or have much less comprehensive product offerings. But what stops anyone including Ptro's customers from copying / reverse-engineering instead of paying licences etc?

[leewain] 02/10/2019 17:02

With todays announcement by the PM I don't see how this business can retain the repeat business thats expected in the second half. The outlook is grim and companies will be looking at cutting back on Capex. Cut losses and sell.

[cordwainer] 02/10/2019 15:58

There are a number of "if's" in the above article, everything depends on new sales. Although much of these sales are to existing customers, they may still be evaluating the software for their businesses, which can take time and then even more time to assess rollout or expansion of the suite, potentially replacing existing investment and development. Telco's do after all tend to be quite large not-so-nimble organisations or at least have to tread carefully due to low margins in my estimation (feel free to counter this point if you know better).
The ramp up in staffing expenses is wiping out profits unless there is an equivalent surge in sales and is either a sign of confidence or a cause for concern and probably both.
For now, I feel there's a bit too much potential and not enough reality in the outlook. Despite the share price drop, I will not be topping up for now just holding and hoping.

[penpont] 27/9/2019 08:02

Text of ST comment in IC yesterday:

Pelatro second-half weighting spooks investors
Simon Thompson

Simon Thompson
Investors were clearly unnerved by today’s half-year results from Aim-traded software company Pelatro (PTRO:55p) after the company guided shareholders to expect a heavy second-half weighting to this year’s results. The shares lost over a quarter of their value, dropping below my recommended buy-in price of 78p ('Pelatro: Big data, big profits', 4 Feb 2019).

I feel they have grossly overreacted as the board has not changed its sales nor profit guidance and still expect to deliver the step change in profits that house broker FinnCap is predicting this year. Analysts are forecasting full-year forecast of $10.5m (£8.5m), up from $6.1m in 2018, to underpin a rise in annual pre-tax profits from $3.1m to $5.7m and a 50 per cent-plus hike in earnings per share (EPS) to 15.4¢. Moreover, both chief executive Subash Menon and finance director Nic Hellyer gave me an insight into how the company’s contract pipeline is progressing, and one that is very supportive of hitting analysts' forecasts.



Big data analytics drives contract momentum

Pelatro’s mViva software uses 'big data' analytics to study live streaming end-user customer data to reveal patterns, trends, associations and behavioural traits of telecom customers. These data-driven insights are then used in precision marketing so that telecom operators can be more customer-centric and not product-centric in their approach. Based on this analysis, relevant offers are then made to end users through a variety of channels such as SMS, email and apps. The offering of five software solutions offers tangible benefits to clients, boosting their retention rates, average revenue per user and share of spend from customers, so it’s not surprising that Pelatro is winning new business.

In the first half, five customers in the Asia Pacific region signed contracts to use Pelatro’s contextual marketing platform including Advanced Info Services, the largest mobile network operator in Thailand, and a member of the Singtel Group, which has 1bn subscribers across its global operations. The AIS acquisition highlights how Pelatro is winning business in other territories from large telecom operators as it now serves two of the seven markets of the Singtel Group. Pelatro now has 18 telecom operators across 17 countries. The company is also monetising the data it analyses; Tele2, the Central Asian subsidiary of a Western European telco, which has more than 6m customers, signed up for the company’s data monetisation platform in the first half.

It’s worth noting that of the aforementioned six new contracts, four are recurring in nature and have a contract value of $5.4m (£4.4m) over the next three years. The other two contracts are licenses which will contribute $1.9m of revenue in 2019. Moreover, of the $2.7m revenue reported in the first half, three-quarters was repeat business from existing customers (change requests, revenue gain share contracts, managed services, and support), thus highlighting the shift towards an annuity style business model. In the first half of 2018, recurring revenue only accounted for a third of the total.


So why the share price drop?

The reason why the share price was marked down is because Pelatro needs to book $7.8m of revenue in the second half to hit house broker FinnCap’s full-year forecast of $10.5m, up from $6.1m in 2018.

The second-half weighting clearly increases execution risk. That’s because having ramped up investment in the business, mainly additional headcount, Pelatro’s profits are operationally geared to rising sales. To put this into perspective, and after factoring in a slight decline in operating expenses in the second half as the directors forecast, then first-half adjusted operating profit of $200,000 on revenue of $2.7m surges to a second-half operating profit of $5.6m on revenue of $7.8m, given that a high proportion of incremental revenue will be converted into profit on relatively a fixed cost base.

Bearing this in mind, the $7.8m second-half sales target, Pelatro has booked a further $2.5m of revenue in the third quarter, and has visibility over $1.1m of additional revenue. This leaves $4.2m of revenue still to book from a near-term pipeline worth $9.2m, split $3.7m across three new customers and $5.5m from eight or nine existing customers. Mr Menon told me that all of these existing customers are repeat customers’ already, which clearly improves the chances of landing new contract work with them. It also explains why the directors remain confident that they can book the $4.2m of outstanding revenue needed to deliver on FinnCap’s full-year forecast. If they do then the shares are simply too lowly rated on a price/earnings (PE) ratio of 4.5.

Furthermore, around 50 per cent of Pelatro’s revenue is repeat business, and the directors are targeting contracts with more than 20 new customers worth $9.2m in additional sales opportunities, excluding the $9.2m near-term pipeline. Conversion of only a small proportion of that pipeline, in addition to the growing repeat revenue stream, would set the company up for another year of growth in 2020. The directors’ optimism looks justified. Buy.

[mfhmfh] 26/9/2019 22:47

Also, for Danateq the terms for the possible payment of $2m as part of the acquisition were not met but seemingly only delayed:

'As we expected at the time of the AGM update, certain contracts within the acquired pipeline have taken slightly longer to complete than originally forecast; as a result their revenue, when recognised, will not fall within the first year earn out period (the 12 months to end July 2019) but are likely to be recognised instead in the second. As a result the contingent cash payment of $2m pursuant to the terms of the acquisition is not payable in respect of the first earnout period.'

[mfhmfh] 26/9/2019 22:45

Danateq seems to be going well:

'The business assets that were acquired from Danateq have been fully integrated and we are gaining significantly from the wider portfolio of customers. The expected cross-selling opportunities have been identified and are in various stages of progress. Further, the new relationships are being leveraged to extract more value from the acquisition.'

[paleje] 26/9/2019 11:31

Thanks handykart, their daily email just landed too apparently ST spoke with Menon, if they do make up ground in H2 then a PE of 4.5 would be just silly.

[handykart] 26/9/2019 11:20

Positive writeup from Simon Thompson, after today's half year results,on Investors Chronicle web site.

[someuwin] 26/9/2019 11:10

finnCap...

Pelatro (PTRO): Corp

Focus on recurring revenue intensifies H2 weighting

It is evident from the Interims that FY 2019 will be notably H2-weighted as H1 sales have seen a shift to annuity model away from large licences. Although H1 revenue grew at an impressive 14% YoY to $2.7m, we forecast 72% YoY growth for the FY, leaving $7.8m required in H2. Management remains confident that this is achievable as sales accelerate though the year; $2.5m already booked to date in Q3 with visibility on a further $1.1m; a total $6.3m of visible revenue YTD. The remaining $4.2m should be derived from a $9.2m near-term pipeline covering a wide range of products into a number of existing and new customers. On that basis we retain our current forecasts, targeting a return to large licence sales in Q4. There is increased risk in this weighting, however PTRO is making significant investment in sales and delivery capabilities and has built a track record of success in cross-selling and up-selling into its global telecoms group customers.

[paleje] 26/9/2019 09:20

Declared trades look fairly even so must be more to it, does seem overly harsh but there's no trust about.

This is a Simon Thompson favourite so perhaps he'll get a column out later.

[theoldcodger] 26/9/2019 09:06

I'm with you hiranlha, marginal misses by smaller companies seem to be severely punished these days.

I failed to act immediately when another of my holdings reported slightly disappointing results a few days ago and the share price then tanked over the course of the day. Lesson learnt, I pulled the trigger on my PTRO first thing this morning, getting a very good price for the day, but still a horrible 25% loss overall.

The Company is currently undergoing a rapid expansion phase, that could bring rich rewards, however, the execution risks are substantial and I just felt that until we have more clarity on what that's going to mean to the bottom line, it was better to be out completely.

I will continue to monitor and hope all comes good for current holders.

TOC

[hiraniha] 26/9/2019 08:31

I'm noticing a trend in the markets where increasingly a lot of companies are releasing updates that have marginally missed targets, and the share price subsequently takes a thorough beating.I mean, do these results deserve a quarter of its share price knocked off?

[outlawinvestor] 26/9/2019 06:54

Hmm, seems the MMs beg to differ!

[rivaldo] 26/9/2019 06:33

The key statement is that with contract visibility the company is confident of delivering expectations:

"The Board therefore remains confident, based on current visibility and the encouraging pipeline described above, of delivering full year results in line with expectations."

Given the pipeline this may well be the case, though of course such a heavy H2 weighting is problematic. Let's hope there aren't rose-coloured glasses being deployed here, as a few contract delays would kibosh such expectations.

Repeat revenues are particularly impressive at 72%.

The overall global opportunity remains huge against the current m/cap, but let's see if the shares remain stable or fall to a bargain price with some investors looking in the rear view mirror rather than forwards.

[davr0s] 26/9/2019 06:21

14% increase, small market cap

[davr0s] 26/9/2019 06:19

Guess your short then

[tjbird] 26/9/2019 06:14

pathetic revenues