Sage Share Discussion Threads

[maddox] 29/5/2024 13:02

Hi jon,

Shares that are trading on a high p/e are subject to what I call 'Expectation Risk' - if the firm fails to meet the Brokers' expectations the share price will fall. This is what happened with Sage - the results themselves were excellent.

Anyone not closely following Sage will see the share price reaction and think something really calamitous has occurred. Journalists then oblige - finding spurious explanations for the fall. The IC dug up an old Panmure Gordon report from February that talked about tough competition. All complete bs.

There was nothing in these figures or the Trading Update Q&A to suggest that Sage is losing out to competitors - just that US prospects are taking longer to commit as they are being slightly more cautious.

Therefore IMHO Sage's value and prospects are the same - but just cheaper to buy.

[1968jon] 29/5/2024 10:40

I was going to post something on the morning of the results but it turned into a rant so I stopped. The gist of it was "are the public markets in the UK worth the aggravation?". On most metrics the numbers met expectations but the stock opened down 20%. I know it recovered a little but still. I have been wrong on many stocks before and plenty of Sage analysts think I'm wrong on this one but a FTSE 100 company should not move 20% unless it is a clear profit warning. If, and I of course recognise that it is an if, Sage continues to grow revs and profits at these levels with improving margins, it will be twice the size in 5 years. If a large PE software firm had bought this in the last four years , and for the life of me I can't believe it didn't happen, it would be on their books at North of £16.

[maddox] 28/5/2024 23:58

The last results were pretty excellent, here are the highlights:

>> Underlying total revenue increased by 10% to £1,152m
>> Underlying operating profit increased by 18% to £254m
>> Margin increasing by 160 basis points to 22.0%
>> EBITDA increased by 14% to £299m
>> Statutory operating profit increased by 38% to £215m
>> Underlying basic EPS increased by 23% to 18.2p.
>> Strong underlying cash conversion of 127%
>> Robust balance sheet, £1.1bn of cash and liquidity, net debt 1.4x EBITDA
>> Interim dividend up 6% to 6.95p, in line with our progressive policy.

And yet we're 17.5% down on our recent 26 March 52 wk High. Unfortunately expectations were looking for an acceleration in growth and SGE fell just short. Whilst still top-lining its geographies North America has moderated somewhat - whilst other geographies aren't quite ready to pick up the slack. So, overall growth didn't accelerate and so the pundits weighed in with negative comments about 'competitive threats increasing' 'well-funded competitors' etc.

IMHO this is a bump in the road - growth is starting to come through in other geographies - a bit early to move the dial yet but looks promising. Whilst the growth has moderated for the moment the margins will continue to improve - thus profitability and cash generation - so all told we're on course.

And who knew - Sage has now emerged as the UK's AI powerhouse. This is clearly not PR fluff as Sage has fully developed products live and early adopter clients on-board. So, coming from behind our nag appears to now broken through and out in front of its competitors.

[halfpenny] 16/5/2024 14:24

Fill ya boots great value and future strong. CEO on Ian King and positive results.

Market Growing fast with AI solutions in High Demand in the SME market.

Future brighter every day with CEO positive about Future.

[amt] 16/5/2024 09:29

So perhaps EPS of 39p and next year 47p
So pe of 25 to 30 looks fine for a safe growth stock.

[maddox] 21/4/2024 15:18

The fool article is a marketing exercise, a few paragraphs of general description, no useful insights - certainly before having to sign-up - I didn't bother. One glaring error - it seems to say the yield is nearly 10% - unfortunately it's more like 1.7%. This might be poor editing and referring to another mystery share that we need to subscribe to discover the name of - but it's far from clear.

This to me probably reflects the quality of Motley Fool's analysis. Why did they pick Sage - that's easy it's gone up 45% in a year - question is were they tipping it a year ago? I'll venture a no.

[maddox] 25/3/2024 17:59

Most of the Brokers have been well off the pace with Sage, even when they moved to a buy rating the share price target has significantly lagged Mr Market - even in a risk-off market environment. So, the current consensus spt is 1168p - c.8% below today's close. I think Mr Market is backing SGE to achieve its ambition to be a 'Rule of 40' SaaS firm and justify a premium rating.

Whilst arguably SGE is looking expensive on a fwd p/e of 33 - but not excessively so if you see Intuit is on a p/e 65 or Xero on 1,250(Morning Star figs)!

[1968jon] 25/3/2024 09:39

You've got to love an analyst! Having interacted with them, I understand that the job is more than having perfect ratings in real-time for every stock and that buy/sell/hold etc are not for instant trade instructions, but optically they look daft. They also don't get fired on the basis of poor ratings.

I don't know what was written in Socgen's note - maybe it included a huge mea culpa, but I doubt it - but for the uninitiated they might ask what has happened to the stock that you told me not to go near and that you now tell me not to buy, other than the share price rising?
I presume Barclays are still sellers per my post above.
Truly, they all hate Sage.

[bigbigdave] 25/3/2024 08:12

*SOCGEN RAISES SAGE GROUP TO 'HOLD' (SELL) - PRICE TARGET 1303 (922) PENCE

[1968jon] 22/1/2024 10:34

You see, I thought they were perfectly decent numbers, but the market clearly needs better than decent to justify a further rise. It is sometime since I have had access to IB research but I see that Barclays have run the numbers again and today go underweight and lower their price target to £9.85. Does anyone have a summary of their thesis?

[maddox] 18/1/2024 09:26

Q1 Trading Update - strong start to the FY24 and full year guidance is reaffirmed. Strong ARR growth continuing the performance exiting last year (11%) and margin increase expected of 0.8%.

SGE's SME market is proving resilient in the light of the macro-economic back-drop. This is borne out by the revenue growth in key drivers:

'Sage Business Cloud revenue increased by 18% to £454m, driven by growth in cloud native revenue of 25% to £174m (Q1 23: £140m) primarily through new customer acquisition, and by growth in cloud connected revenue from both existing and new customers.'

As the Sage Business Cloud Native products become more dominant in the product mix we should see the overall revenue (at 10% for 1Q24) trend towards the higher growth rate (25% for Cloud Native in 1Q24).

[maddox] 06/12/2023 10:12

Very impressed by the share price resilience. The shares jumped up 14% on the results and has powered on further rather than dropping back. Clearly the share buy-backs will be supportive but I suspect the steady rise from March took out any weak holders - so buying activity is not finding ready sellers.

We've seen some more Broker upgrades, Bank of America share price target 1300p, Citi 1300p, JPM 1250p, but Canaccord amend to Sell and 970p spt.

Overall, SGE at 1145p as I post is above the 1124p Brokers Consensus and 53% up so far in the calendar year. I wonder where we'll be if SGE become fashionable?

Well done all holders.

[1968jon] 23/11/2023 12:54

I am not saying the share price should be higher and I know some houses now have a target materially above spot and I have a very low opinion of analysts generally, but as evidence that this stock is still nowhere near fashionable, I give you Barclays and Deutsche raising their targets to £10.50 and £11 post-numbers yesterday.

[1968jon] 22/11/2023 12:48

Clearly a bonkers but welcome move this morning. I have little faith in analysts' assessments of this stock but at least JPM, who were ahead of the curve, have raised their target to £12.50 today. Shore cap (I know, I know, slightly different calibre of firm than JPM) will be pleased they went from buy to hold on Friday.

[maddox] 22/11/2023 12:17

Yep, we've blasted through the Brokers' Consensus share price target of 1016p. As I post we're at 1128.5p up 131.3p (13%). The Brokers have been way behind Mr Market on SGE - they don't appear able to shake-off their previous perceptions of SGE as an old on-premise perpetual licence underperformer.

Interesting reaction - Mr Market has recently not responded to good results. Perhaps market sentiment is changing? Let's see how much of this gain is retained.

[nhb001] 22/11/2023 11:23

I think it's fair to say the market likes those results. :-))

[maddox] 22/11/2023 08:48

Excellent results - the transformation is now clear to anyone that cares to look. The share price has run-up in advance but it looks like these results are good enough to justify the valuation. Against a pretty grim market back drop it's very pleasing to see the performance SGE is achieving.

Highlights
>> Underlying recurring revenue increased by 12% to £2,096m;
>> Margin increasing by 140 bps to 20.9% (constant currency);
>> Underlying basic EPS increased by 22% to 32.3p;
>> Cash conversion of 116%;
>> Final dividend of 12.75p, increasing the full year dividend by 5% to 19.3p;
>> Share buyback programme of up to £350m announced.

SGE have a clear winner with SGE Intacct and are aggressively rolling out geographically as well as investing in developing tailored versions for specific market verticals - for manufacturing, construction etc.

The successful transformation to a SaaS business is clear in the metrics:

>> Renewal rate by value of 102% (FY22: 101%), ahead of last year driven by more sales to existing customers and retention.
>> Sage Business Cloud penetration of 84% (FY22: 75%);
>> Subscription penetration of 79% (FY22: 75%).

Really good to see this strong underpinning that is hugely attractive.

With high quality recurring revenue; evident pricing power; growing operating margins; generating surplus cash and new customer acquisition growth - these are very impressive results.

[mellorscarthwaite] 09/9/2023 11:00

Then select download pdf

(Available without subscription)

[maddox] 07/9/2023 11:21

Thanks BH - it looks like Advfn are disallowing sharing the live link.

Looks like we've broken through 1000p this morning.

[nhb001] 06/9/2023 21:02

Thanks bh for sharing that link. Nice to see the reason for the surge today. It seems that a general consensus is forming that Sage now has the market leading product in Intacct. They bought Intacct way back in 2017 and it's taken an age to get to this point but it seems as if they are about to reap the rewards.

[bountyhunter] 06/9/2023 18:50

Maddox - thanks for the pointer - not perfect but this is the link, just cut and paste into a browser to access it..

Sharecast.com/news/broker-recommendations-/broker-tips-sage-bm-darktrace--14609134.html

[maddox] 06/9/2023 17:04

Hi Jon,

Welcome aboard. Yes, Sage have suffered from an image problem - which once formed in people's minds - is very difficult to change. Admittedly the SaaS and Cloud transitions has been a long-haul as has exiting country business units, old products and business lines (payment acquisition). But opinions on SGE are changing and that is clearly being reflected in the share price.

As JPM point out SGE Intacct is an important growth engine - it's been a big success in the US market - and this growth should accelerate as it rolls out to other geographies.

(Closed 990.40p +17.40 +1.79% new 52wk closing high).

[1968jon] 06/9/2023 15:35

I own a bloody great chunk of these but have not been on here as I had not seen recent posts before. I will not be a frequent poster but possibly join in occasionally.
My take, having owned them and been very aware of them for a good few years. Goodness me they are not/have not been seen as cool/exciting by the city for forever. Possibly (definitely) viewed as a bit parochial and old school with a sniffiness about their ability to transition from legacy stuff to the cloud.
I have hoped that these notions would eventually change. Who knows what price they should be and I note some posters comments on their considered high P/E ratio. Equally the comments referencing the valuation of Intuit.
Talking my book, I am more interested in their EV/EBITDA ratio at about 20x. European private equity accounting software/SAAS companies are sometimes/often marked at 30+x.
Doesn't mean that is where they should be but I would be surprised if during the dog days of 2022 some large shops were not looking at a takeout. Pay a 20/30% per share premium and have an instant 50% uplift on the new NAV mark.
It would be a mega deal now and I have no insight but either some marks have to come down or their share price can continue to rally (I hope)

[maddox] 06/9/2023 12:46

Sharecast report

'JP Morgan has placed Sage on its "positive catalyst watch" ahead of the accounting software group's fourth-quarter results in November, where it expects to see solid growth with its cloud finance offering Intacct.

The bank reiterated its 'overweight' rating on the stock with a 1,100p target price.'

[...] [Unfortunately the pasted link is edited out]