StatPro – breaking back into big profit could see share price upside

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StatPro – breaking back into big profit could see share price upside

Any good news at this month’s AGM could help shares in StatPro to an early recovery, writes Mark Watson-Mitchell. 

Over the three years to end December 2018, StatPro Group (LON:SOG) lost nearly £14.6m, whilst its revenues increased to a total of almost £142m in the same period. To be fair those losses were after accountants had adjusted the returns to allow for amortisation of acquired assets, acquisition and restructuring costs and other considerations.

So why should we be interested enough to look at the shares of this company? Well as far as I can see, this group is now on the profits trail and its shares, now 130p, look set for a recovery to trade above the March 2018 high of 186p.

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StatPro is the only Cloud-based portfolio analytics provider, principally to the fund administration sector. It also provides asset data services and data management tools for the global asset management industry and asset management service providers.The Group operates through 10 offices in Europe, North America, South Africa and Australia, servicing around 500 clients in 40 countries.

This year it is being organised into three divisions: Revolution; Source: StatPro; and Infovest. Already this year the reorganisation is showing big benefits and reduced ongoing costs.

Revolution is a global provider of award-winning portfolio analytics solutions. The cloud-based platform offers vital analysis of portfolio performance, attribution, risk and compliance. It helps clients reduce costs, improve client communication and control investment decisions. In the 2018 year this division had an annualised pro-forma revenue of £46.5m.

Source: StatPro is a global market data business and provides Data-as-a-Service to Revolution to enable analytics. The division’s integrated and global data coverage includes millions of securities covering the full range of financial instruments and benchmarks. This part of the group had an £8.5m revenue last year, of which £3m was intra company with the Revolution side.

Infovest, supplies data management solutions for the global asset management market, including data warehouse technology, ETL (Extract, Transform and Load), compliance and reporting tools as well as portfolio management solutions. The annualised pro-forma revenue for Infovest in 2018 was £5.6m.

Overall the group considers that the fund sector is increasingly important to its future. It declares itself as being uniquely adapted to provide a lower cost service to asset managers as they realise that outsourcing their requirement is the way forward.

Just a couple of weeks ago the group announced a contract extension, worth $1.2m over the next three years, with a major fund administrator for its StatPro Revolution product.

What I really like about this company is its massive annualised recurring revenue, that which is contractually committed as at the year end. Last year it was £55.7m, which is worth some 96% of this year’s brokers estimate of £58m in total revenue.

Its pre-tax profit is expected to be around £6.5m for this year, giving earnings of circa 8.4p per share. Furthermore, the estimates for next year are for £61m of revenue and pre-tax profits of £7.8m, producing 9.7p in earnings.

However, it was hinted that acquired expansion is on the cards, following the recent announcement by the company that it has increased and extended its flexible financing facilities with Wells Fargo Capital Finance, now up to £49.1m. This secured financing facility is ‘available for acquisitions, share buy-backs and general corporate purposes.’

From what I can see, the shares of StatPro, now 130p, are ready for an early price recovery. Any good news out from the AGM on 23rd May will really help the process. A target price of 185p within the next year or so looks attainable.

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