1Spatial – one special case of ‘insider’ buying

1Spatial insiders have been buying shares recently – and Mark Watson Mitchell thinks it could be worth following them.

I do love to see a company’s chief executive and its chief financial officer both buying shares in the company that they work for – I see that as a great sign of confidence.

So, when I noted a couple of weeks ago that Claire Milverton (CEO) and Andrew Fabian (CFO) had respectively purchased 40,906 and 50,000 shares in 1Spatial (LON:SPA), my interest perked up.

I have had the company in my profile sights for a while, so their share purchases caught me at just the right time. 

What makes their purchases even more intriguing is the fact that their company’s shares have risen some 64% since the beginning of 2020. Considering that they traded a fairly narrow 20p to 25p band for the best part of last year, it is even more impressive that the two senior executives paid 44p a share for their additional holdings.

And what is more I feel that their timing as ‘insiders’ is absolutely right and now you can join them at a cheaper price, because they are currently trading at around the 41.5p level.

Software as a service (SaaS)

The company, which was set up in 2005, has its headquarters in Cambridge. It used to be called Avisen until 2012, when it changed its name to 1Spatial.

Today this £46m group provides software solutions and business applications for managing location and geospatial data.

What is ‘geospatial’?

Geospatial or spatial data describes data that represents features or objects on the Earth’s surface. Whether it is man-made or it is natural, if it has to do with a specific location on the globe, it is described as ‘geospatial’.

Just think how much we use it almost every day of our lives. Planning a road trip, looking online for the nearest chemist, or syncing your location on Facebook or other social media – massive everyday usage. And consider the mass of commercial uses.

A global leader in LMDM

This group, which is a global leader in providing ‘Location Master Data Management’ (LMDM) software and solutions, helps its customers make better business decisions and move forward to a smarter world by unlocking the value of location data. 

Its LMDM platform delivers powerful data solutions and business applications ‘on-premise’, ‘on-mobile’ and ‘in the cloud’. Thereby ensuring that the data is current, complete, that it is consistent through using automated processes and that it is always based on the highest quality information available.

As location data from smartphones, the Internet of Things (IOT) and the masses of ‘big data’ increasingly drive commercial decision-making, this group’s technology helps to drive efficiency and provides its client organisations with confidence in the data that they use. 

An impressive client list

With operations in the UK, Belgium, USA, France, Australia, Ireland and Tunisia, the company’s global clients include national mapping and land management agencies, utility companies, transportation organisations, government and defence departments.

Such customers include the Brazilian Army, Google, Network Rail, the European Union Satellite Centre, the Royal Saudi Air Force, the Environment Agency, Transport for London, the Arizona Department of Transportation, the State of Michigan, the MoD’s No1 AIDU (aeronautical information document unit), California’s Office of Emergency Services, the Energy Networks Association, the Rural Payments Agency, the Ordnance Survey, the US Department of Commerce, Northumbrian Water, Northern Gas Networks, the US Geological Survey and United Utilities amongst so many others.

A strong equity 

There are some 111m shares in issue, of which nearly 320,000 are held in treasury.

Large holders include Columbia Threadneedle Investments (20.00%), Canaccord Genuity Fund Management (16.17%), Azini Capital Partners (12.41%), Harwood Capital (6.72%), BGF Investment Management (5.56%), JO Hambro Capital Management (5.43%), and Herald Investment Management (3.58%).

Broker’s estimates back its ‘buy’ rating

The last trading year has shown that the group is now achieving a growing annual recurring revenue, now some 43% of the 2020/2021 £24.6m sales – perhaps it is needless to say that I look for a greater ARR in due course, and that is happening.

The company’s recurring revenue has been increasing year on year, while its order book of committed revenue and longer-term contracts increased similarly.

Analyst Olivia Honychurch at Liberum Capital is looking for sales to advance to £26m for this year to end-January 2022, generating £1m pre-tax profits, worth 1.1p per share in earnings. 

For the 2022/2023 year she forecasts £28.5m revenues and £2.3m profits, worth 2.3p in earnings. She rates the group’s shares as a ‘buy’ with a price objective of 70p.

My View 

This group had a rough Covid-19 year and has pulled through, while also restructuring its operations. It has a strong turnaround strategy in place and should do very well over the next few years.

In the middle of March this year, the group’s shares peaked at 52.45p following its trading update for the year to end-January.

I now set a 52.5p target price on the group’s shares, currently just 41.5p. In fact, I feel that they will move even higher than that within the next couple of years.