Sage Share Discussion Threads

[maddox] 27/7/2023 11:28

Q3 nine month update today. Growth is continuing and on-track for FY23 of 10% growth overall. No impact seen from macro-economic factors - interest rates/inflation.
The renewal rate is 101% consistent with past 18 months indicating a stable competitive environment.

Looking beneath the headline numbers - there are some positive growth drivers building momentum. Intacct US growth 30% and >40% in new territories - albeit from a low base. The launch in Europe has started well and I note Q3 growth was 7% up from 3% at 1H. The Sage Business Cloud organic growth at 28%.

Margins are targeted to rise - with 20.8% for FY23 and to continue widening thereafter. The aim is for SGE to be a 'Rule of 40' SaaS business.

In recent years, Rule of 40 has gained widespread usage as a yard-stick target measure of growth by investors in SaaS firms, first coined by Brad Feld. The Rule of 40 states that if a company's revenue growth rate is added to its profit margin, the total should exceed 40%. No breakdown offered on the mix today - and it'd be very interesting to know what their thoughts are?

The rationale is ofc that a SaaS Rule of 40 firm will command a premium rating, but again not stated, and on a p/e of 27 as mentioned above SGE is already considered highly valued in the context of the UK market.

Post script: Mr Market liked the results - new high 951p

[maddox] 19/7/2023 10:27

To put this undervaluation into context. In the UK SGE is considered highly valued on a p/e 27, however, Intuit (QuickBooks)is on a p/e 62.79 and Xero a p/e of 133.

If Sage was on a p/e similar to Intuit - it's share price would be over £20. Obviously, I'm not suggesting that SGE will valued on a similar p/e to Intuit or Xero anytime soon - it's far more likely that they will come more into line with SGE - particularly if they disappoint.

[maddox] 19/7/2023 08:57

Sage is looking very strong - hitting new highs - yesterday and again today at 947.4p. Positive comments from Nick Train - talking about the undervaluation of UK shares as compared with similar firms internationally:

'Train, who invests in the London Stock Exchange Group, said that the negative sentiment meant there were opportunities to snap up “wonderful companies that are wrongly priced”, citing cloud-software provider Sage as an example.'



and in ii:

'Nick Train is not a value investor, but he argues that his portfolio is cheap.
The stock picker, who runs the UK share portfolios Lindsell Train UK Equity and Finsbury Growth & Income, is known for picking high-quality companies, with established brands that can keep growing profits. He has always been happy to pay a premium price for such shares.

But in his latest note to investors, Train says his portfolio is undervalued compared with similar international companies. He also says that the UK market as a whole is extremely cheap compared to other major stock markets.' 'But he argues that his companies are “outstanding” and priced cheaper, on a P/E basis, than American rivals. “Now, of course these pairs are not exact ‘like-for-likes'; just as Sage Group SGE is not an exact comparator for Intuit Inc INTU'

[the_knight_of_spring] 28/6/2023 12:23

I think it is far more significant than a broker buy recommendation that the Chief Product Officer bought 13,000 shares yesterday at around £8.70 (last day before the close period?). He bought a lot of shares maybe Feb-Apr around £7.60. So instead of taking a 15% or so profit, he has bought even more.

[maddox] 28/6/2023 10:25

It's about time - most Broker's targets have been sitting well below the share price - despite being 'buy' recommendations. Hopefully, this will spur a few more to revise their share price targets upwards.

[maddox] 28/6/2023 10:16

Yep, currently up 34p to 912p a 4.4% jump this morning and nearly half a million traded already against a c. 2.5m average. There is no supportive news as far as I can see and market is pretty dismal more generally - so looks like SGE is gaining some FI fans.

[catch007] 28/6/2023 09:59

JPMorgan raises Sage Group to 'overweight' (neutral) - price target 1,100 (860) pence

[nhb001] 28/6/2023 09:00

Big move this morning.

[nhb001] 16/6/2023 13:35

Yep. Looking good so far. Large volumes of late as well.

[maddox] 16/6/2023 09:19

Looks like we've hit two new highs in the last three days - 881.20p today so maintaining strength.

[maddox] 06/6/2023 23:13

Hi nhb,

Well we've negotiated the xd and hit yet another high today at 877.2 so the uptrend is maintained.

[nhb001] 01/6/2023 07:27

Hello Maddox. This is true and nice to see but I suspect we may retrace a little from here. Today Sage goes ex-dividend and the price action recently has been a spike before and a retrace afterwards. I would be happy to be proved wrong though!

[maddox] 31/5/2023 23:21

we're hitting repeated highs - latest print 872p. We should be attracting the attention of momentum traders - perhaps we'll have some new posters joining the thread.

btw wad - what do you have as the all-time-high?

[wad collector] 19/5/2023 17:38

Almost back to the heady prices of 2002.
I like the hypothesis that rising customer costs encourage the use of more efficient accounting software.

[maddox] 19/5/2023 14:37

Hi Justiceforthemany,

All good points - but Sage has a highly resilient business model that can support the debt which is only 1.3x EBITDA and has respectable Piotroski F-Score of 6 and Altman Z2-Score of 4.5. So, pretty typical and not of much concern.

Accounting software isn't a discretionary purchase for most businesses. Once, you've purchased it - got all your figures into it - you're unlikely to switch. Closure, bankruptcy and liquidation is the greater risk for losing a customer - and little sign of this in the last SGE results: Renewal by value at 101% and £190m of the £222m increase in ARR came from new customers.

Talking of trends - as I post, we're breaking to new highs, and hopefully breaking out from the sideways tunnelling.

Regards Maddox

[justiceforthemany] 19/5/2023 13:38

To add have a look at the balance sheet. Not good.
£2.2Bn a hefty chunk of their assets is 'goodwill'
Debt to equity is 2x
Anyway this market is psychotic and irrational, all about the trend so could go up another 10% or so but the downside is substantial.

[maddox] 19/5/2023 13:10

The Chronic Investor IC 19 May 2023 Buy. 'Sage could be a counter-cyclical buy'

'Rather than just pushing back against the cyclical story, the top-line growth suggests that Sage could actually be a counter-cyclical story. Its momentum in the face of current challenges means the 2024 price/earnings ratio of 23.2 isn’t off-putting. We stick to buy.'

They also highlight the Cloud-native ARR grows at 30% driven in part by the performance of Sage Intacct.

[maddox] 18/5/2023 20:35

Opps, sorry Amigos posted this on the wrong thread - reposting for continuity.

Very strong 1H23 results today (17 May 23) as the underlying Business Cloud growth breaks through to dictate the top-line results. Highlights:

>> +12% Organic Annualised Recurring Revenue (ARR);

>> Operating margin increasing by 60 basis points to 20.8%;

>> Cash conversion 117%; and

>> 101% Renewal by value.

The star of the show is Sage Intacct which is growing at 30% in the highly competitive US market - and now rolling-out in other geographies. This product is clearly winning new customer acquisition. The widening Op Margin is really good news - and this is expected to continues as SGE focus on growing revenue faster than costs. This will magnify the growth at the bottom-line profit/ eps level translated from the the top-line growth.

No sign of macro economic or competitive factors impacting progress with 101% renewal by value - with some sub-inflation price increases included. The overall goal for SGE is to deliver 'consistent double-digit growth' with a target of 11% for full FY23.

[maddox] 18/5/2023 00:07

Hi justiceforthemany,

Nop not cheap. If your looking for cheap - SGE is never 'cheap'.

However, that doesn't make SGE a bad investment - if growth accelerates and its margins widen, as appears to be occurring, then it might be very good value at 842.8p (up 21.8p 2.66% today from 821p).

My assessment is that SGE's painful transition is largely complete and they'll deliver the promised sustained double digit growth, that with widening margins, will propel the earnings per share forward and will throw off cash. If this occurs 842p will look cheap looking back and deserving of its premium rating.

Looking forward to see how the next few results go - that should confirm the growth trajectory or not.

[justiceforthemany] 17/5/2023 17:52

A P/E of almost 30, is that supposed to be cheap?
No thanks.
Cisco trades at just 10x earnings which means Sage should be nearer 300p
Market is truly insane. Forget fundamentals just follow the sentiment until something breaks or a broker discovers his conscience....
Strong sell

[nhb001] 17/5/2023 09:42

You beat me to it Maddox :-)) Very positive investor presentation just ended. I wish all my holdings were looking as good.

[maddox] 17/5/2023 09:25

Very strong 1H23 results today as the underlying Business Cloud growth breaks through to dictate the top-line results. Highlights:

>> +12% Organic Annualised Recurring Revenue (ARR);

>> Operating margin increasing by 60 basis points to 20.8%;

>> Cash conversion 117%; and

>> 101% Renewal by value.

The star of the show is Sage Intacct which is growing at 30% in the highly competitive US market - and now rolling-out in other geographies. This product is clearly winning new customer acquisition. The widening Op Margin is really good news - and this is expected to continues as SGE focus on growing revenue faster than costs. This will magnify the growth at the bottom-line profit/ eps level translated from the the top-line growth.

No sign of macro economic or competitive factors impacting progress with 101% renewal by value - with some sub-inflation price increases included. The overall goal for SGE is to deliver 'consistent double-digit growth' with a target of 11% for full FY23.