Beeks Financial Cloud – Successful Connections
The growth in the applicability of its Private Cloud for the financial services sector is proving to be a continuing driver for Beeks Financial Cloud (LON:BKS).
The interim results for the six months to end December 2022 have shown increased sales and growing profitability for the ‘connectivity’ group.
Beeks is a leading managed cloud computing, connectivity and analytics provider for Capital Markets and financial services.
It has connections to over 200 exchanges and leverages 20 data centres across the globe.
The group has a simple vision – Build, Connect, Analyse.
The Business
Set up in 2011, the Renfrew, Scotland-based group has been the leading managed cloud compute, connectivity and analytics provider in the financial markets since 2011.
It delivers bare-metal cloud and low-latency compute, connectivity and analytics, on demand and optimised exclusively for global capital markets and financial services.
With sub-millisecond latencies, the Beeks infrastructure greatly expedites the time taken from placing a trade to its execution – a critical factor given the time-sensitivity demands of the group’s customers.
Its cloud-based ‘Infrastructure-as-a-Service’ (IaaS) model gives organisations the flexibility and agility to deploy and connect to a variety of Exchanges, trading venues and cloud service providers at a fraction of the cost of building their own networks and infrastructure.
Beeks is now recognised as an established technology provider to financial markets, with a track record and compelling reference clients, providing through its Private Cloud, Proximity Cloud and Exchange Cloud services, a strong foundation to drive its business forward.
The Interim Results
Revenues were up 35% at £10.4m (£7.72m), while its annualised committed monthly recurring revenue was 35% better at £21.30 (£15.8m).
Underlying pre-tax profits were 44% better at £0.65m (£0.45m), with half-time earnings of 1.35p (0.90p) per share.
CEO Gordon McArthur stated that:
“With our proven track record and well-established reputation as a provider of technology to the financial markets, we retain strong confidence in continued success for Beeks. Our principal focus for the second half will be to convert our substantial pipeline of opportunities across the newly launched Exchange Cloud offering.
While the macro environment presents challenges to all businesses, we believe the shift of the financial services sector to cloud computing will continue at pace. Our pipeline of business with both existing and potential new customers provides us with a considerable runway of visible revenue and our balance sheet strength has enabled us to continue to make substantial investment into product, people and stock capacity to capitalise on this pipeline and considerable market opportunity.”
The Equity
There are some 65.43m shares in issue.
Gordon McArthur holds 42.0% of the equity, while other large holders include Canaccord Genuity Wealth (14.6%), Octopus Investments (5.88%), Lombard Odier Asset Management Services (5.06%), Artemis Investment Management (4.44%), Janus Henderson Investors (4.42%), Burgundy Asset Management (3.92%), Liontrust Investment Partners (3.36%), Gresham House Asset Management (2.29%) and KW Investment Management (2.27%).
Broker’s View – Target Price Of 220p Per Share
Analysts at the group’s broker, Canaccord Genuity, rate the shares as a Buy, looking for a 220p Target Price.
For the current year to end June they have estimates for £25.0m (£18.3m) sales, with adjusted pre-tax profits of £3.1m (£2.1m), worth 4.7p (4.8p) in earnings per share.
The coming year could see £30.0m revenues, £4.1m profits and earnings of 5.5p per share.
At Progressive Equity Research their analysts are impressed by the potential for considerable additional growth given the size of the pipeline for Exchange Cloud.
Their figures for 2023 suggest £24.5m revenues, £3.2m profits and 4.2p of earnings.
The 2024 year could be worth £29.1m in sales and £3.7m profits, with 4.9p earnings.
My View – Still Offering Big Upside Despite Premium Rating
With its shares trading at 145p, they are rated out on a substantial price-to-earnings ratio of a consensus 32 times for 2023, before dropping to 27 times for 2024.
But that should not steer investors away from a company that is undoubtedly a leader in a phenomenally fast-growing market, which is said to be worth over $500bn and is compounding at over 15% per annum.
It is for such participation that investors should be prepared to pay a premium and await the inevitable uplift.
I now set a Target Price on the shares of 180p over the next year or so.
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