Sage Share Discussion Threads

[stevemace] 03/10/2018 15:02

hxxps://www.accountancydaily.co/avalara-launches-free-excel-add-making-tax-digital-vat?utm_campaign=9903704_Accountancy%2003%20October&utm_medium=email&utm_source=CCH%20Magazines&dm_i=B5X,5W9QW,PLZCAN,N2EQF,1

[essentialinvestor] 04/9/2018 12:56

Analysis in the FT today for anyone interested - Sage's solid reputation shaken.

[topvest] 31/8/2018 17:38

I’ve been looking at Sage. It’s clearly a strong business. Very good write up by Value Investor this week. It indicated that the dividend is too low and dividend growth of 8% was probably unsustainable if Sage is only growing earnings and revenue by about 5% which is what they have been doing. The write up basically summarised that it was worth looking at when closer to £4. It was a really good article. CEO going sort of emphasises that this is potentially a bit of a value trap with more downside than upside in the short term. One to keep on the watch list.

[tsmith2] 31/8/2018 10:27

Chart down to £5. Sage are facing v v stiff competition

[essentialinvestor] 31/8/2018 10:08

Note the proviso to the achievement of guidance.

Underline that in red.

[volsung] 31/8/2018 09:59

Could be a triple bottom on that chart

[peter27] 31/8/2018 08:10

With the weakness of £ and noCEO they must be a takeover target and I have added on that basis.

[andrewhbruce] 31/8/2018 07:45

Sad as Stephen is nice chap, well liked and respected, however turning Sage round was always going to be a huge challenge, particularly with the discounting new boys snapping.

[spacecake] 31/8/2018 06:20

Rewarded for failure yet again.

[maddox] 23/8/2018 11:34

Hi Rock Star,

Yep, I agree, that is the received wisdom. The picture isn't clear and FWIW this is how I see it.

Xero, Quickbooks and the like are positioned very much as entry-level products sold with free offers and have low price points. This is a market segment that Sage wasn't really competing in until they launched Sage One Mobile App Product(in 2014 I believe). They then followed the Xero, Intuit heavily discounted pricing-approach - but quickly dumped it as they weren't happy with the quality of the business they were acquiring. I think this is because they want to target serious growing businesses that will be prepared to pay full-price for a scaleable product-set. The one-man business isn't really what they are after.

On the other hand, Sage results show that they are clearly growing, recurring revenue is high, and have stated that customers are not being lost to competitors. This of course flies in the face of Deutsche Bank's Analyst that says that they are under pressure in their core markets (Scale-up and Enterprize).

So, Sage's glass is either half-empty or half-full depending on how you wish to look at it.

Regards, Maddox

[rock star] 23/8/2018 09:25

All I hear is Xero and Intuit are taking market share. Not sure where the best place is to check this out a real time basis.

[maddox] 20/8/2018 11:38

Hi Guys,

Well I don't doubt Deutsche Bank's findings - my own scuttlebut research has found the same issues. Accountants and Sage customers have the perception that their products are out-of-date and the likes of Xero and Intuit have far superior products. No doubt Xero and Intuit didn't seek to dissuade the Deutche Bank Analysts that that is the case.

The real problem for Sage is that many of their customers and their customers' accountants are off-contract (support and maintenance)and out of touch with Sage. Whilst Sage have had a complete transformation over the last two years - a large portion of their customer base and target market are unaware.

This is both a problem and an opportunity for Sage - these off-plan 'customers' are not generating any revenue for Sage. In theory, they should be a soft target - and get them onto a subscription and that 7% organic growth looks a very realistic goal.

[spacecake] 20/8/2018 10:46

It's all guess work intil the actual come out in November.

[wirralowl] 20/8/2018 10:03

Commentary from Shares Mag

[hatfullofsky] 20/8/2018 08:42

6% fall from a broker downgrade.

20/08 DB 540 (630) Sell
03/08 UBS 700 Neutral
03/08 CS 660 Neutral
03/08 CFRA 665 (600) Hold
23/04 GS 780p
SOCGEN Sell 583p
JPM Neutral 670p
CITY Buy 750p

I disagree with DB

[maddox] 20/8/2018 08:00

Phew, for a minute I thought it might be something tangible. There is plenty of doubt about Sage atm - difficult to see what this adds to the picture. Are there any particular points of concern that we aren't already aware of?

[dogwalker] 20/8/2018 07:10

SELL recommendation today by DBank....not exactly helping the share price, for now anyway.

[pireric] 03/8/2018 17:19

management said 6.5 wouldn't be close to 7 so not sure anything below 6.7 would count. they would need 7.5 in q4 for that? wasn't their q4 last year much better than the rest of the year and so a tricky base?

Im not inclined to believe management here

[maddox] 03/8/2018 08:10

Pireric, Henchard,

Well yes, they are currently running at 6.8% in Q3 and accelerating, so they could well get towards 8% in Q4. Howevver,the target is actually 'around 7%' so basically a bit of wriggle room - anything above 6.6% basically counts.

[henchard] 02/8/2018 19:31

pireric - good spot. Following 6.3% in both Q1 and Q2 and 6.8% in Q3, a jump to 8.4% in Q4 to hit 7% for the year looks quite a tall order.

[pireric] 02/8/2018 19:08

How on earth are Sage meant to hit their 7% target for the year if they are running at 6.5% year to date... doesn't that mean they need to deliver around 8.4% in Q4?!

[maddox] 02/8/2018 15:19

Hi Mozy,

Well the transition to SAAS pricing has been progressing very well - 78% of Sage's revenue is recurring and 44% is SAAS contracts, so they are over half converted. Also, new sales tend to be on a SAASs basis.

From a standing start a couple of years ago with Sage Business Cloud, cloud annualised recurring revenues are £386m, This accounts for for I estimate about 25% of revenue currently with strong growth of 56% growth year on year.

Comparison with Xero and Intuit is interesting.

Xero is on a market cap - roughly half that of Sage c.£3.4bn, its total revenue is less than Sage's Business Cloud revenue, it is loss making and doesn't pay a dividend.

Intuit's market cap is 5x that of Sage at c. £40bn has been growing revenue at 4.7% over the last three years (v. Sage 6%) and yet on a p/e of 44 (Sage p/e 18) and paying 0.75% dividend (Sage div yld 2.8%).

Clearly, both are vastly more expensive than Sage albeit trading on different markets. This suggests that Sage should be valued between 3 and 5 times its current value if valued on a similar basis to Intuit or Xero. So all somewhat anomalous, Mr Market as well as being bi-polar also has cognitive dissonance (the ability to hold two contradictory opinions at the same time).

Sooner or later he will come to his senses.

Regards Maddox

[poolies3] 02/8/2018 14:44

Cheers Maddock
Think I am a bit grumpy at minute
Most of my shares come out with cracking updates and proceed to plummet
Though pm Sage are on the up