This telecoms marketing solutions specialist could well prove to be an ideal buying opportunity for tech investors who enjoy the thrill of speculation on young but fast-developing companies, writes Mark Watson-Mitchell.
Way back in the November 2018 edition of the Master Investor Mag, analyst Richard Gill pinpointed the investment attractions of a relative AIM newcomer called Pelatro (LON:PTRO), with its shares then trading at 69p.
They subsequently touched 98p in early April this year. Just two months later they fell back to 71p, which was only days after the telecoms precision marketing specialist announced its 2018 results.
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Now, trading at around the 76p level, I consider that this could well prove to be an ideal buying opportunity for tech investors who enjoy the thrill of speculation on young but fast-developing companies.
Pelatro specialises in providing telecoms companies with marketing solutions software offering both flexibility and agility for the optimisation of business results in just one tool – the mViva MMH suite, covering loyalty management, gamification, survey and data monetisation, contextual marketing and unified communication management.
Customers across the world include: Smart Axiata (Cambodia), Inwi (Morocco), Celcom (Malaysia), Telenor (Norway and Pakistan), Ncell (Nepal), Sudatel (Sudan), Expresso (Senegal), Tele2 (Sweden), Dialog Axiata (Sri Lanka), Globe Telecom (Philippines), Bahamas Telecom, Robi Axiata (Bangladesh), PrimeTel (Cyprus), VNPT (Vietnam), Digi (Malaysia), and Grameenphone (Bangladesh). More are in the pipeline, with contracts being negotiated all the time, and several said to be close to being awarded.
The company now has some 18 clients across 17 countries, with massive cross-selling opportunities, hopefully helping to boost its revenue and earnings growth. Based in the UK, the company has subsidiaries in Singapore and the USA. It also has an important development partner in Bangalore, India.
This multichannel marketing hub specialist was founded way back in 2013, was then built up by a very experienced telecom team and eventually went public in December 2017. It is still at a very, very early stage of its development, but the group’s potential is substantial.
Over the last three years its revenue has increased from $1.21m in 2016, to $3.15m in 2017 and up to $6.12m for last year. In the same period, it has gone from a $0.36m pre-tax profit to $1.8m, then up to $3.1m for 2018. Current estimates suggest that sales for this year, to end December, will be around $10.5m, with pre-tax profits at a whopping $6.0m. Then, next year just $12m of sales revenue could produce $6.3m pre-tax.
Remembering that all of its revenue is based in the US currency, earnings of 10.1 cents per share for 2018 and estimates for this year of 15.4 cents, when converted, come out as 8p for last year and 12.2p for this year.
So, with the shares trading at 76p that puts them on a mere 9.5x price-earnings ratio for 2018 and possibly just 6.3x for this year. That is incredibly low for such a fast-growing technology based innovating software group, a specialist in its chosen telecoms sphere.
With 32,532,431 shares in issue, the Company is valued at £24.7m. Institutional holders in its equity include: Chelverton (6.62%), Rathbones (5.37%), Herald (4.80%), Artemis (4.74%), Killik (3.84%), Hargreave Hale (3.16%), and Maven Capital (3.09%). Meanwhile, Kiran Menon and Virun Menon each hold 14.88% of the equity, whilst Sudeesh Yezhuvath holds another 10.17%. Subash Menon and Sudeesh Yezhuvath were co-founders of the group and both are still executive directors.
I think that Richard Gill was right on the button last November in rating these shares. They have since been up and have fallen back – now they seem to me to be an excellent tech speculation.