A good contact, Robert Corden, a week ago pointed me in the direction of Pelatro (LON:PTRO). This was helpful since I had taken an initial plunge based on the recommendation of Simon Thompson of the IC perhaps nine months ago. I had then bought around 70,000 shares at 54p.
I asked Robert to summarise the business of PTRO. Here is his reply: “Very simply they look at the big data from the customers of their telecom clients. Using this they can design loyalty programmes etc and target users thereby creating loyalty to the mobile operator and increase its customer retention. There are a number of different software products which allow them to accomplish this.
Mobile phone companies (obviously) want to keep users. So reduction in customer churn is really important. It is my understanding that the use of PTRO products reduces customer churn. But PTRO is now adding a new service which targets advertising.”
Avoiding churn is a substantial prize as is also recurring fees charged. This is being achieved since inspection of the recently released 31st December 2020 figures show just this. In fact, the sales are slightly down in total on 2019 but I think we can ignore this given the curious commercial climate of the bulk of 2020 and an emphasis on recurring sales. The outlook for 2021 is very positive and a big increase on 2020.
There is heavy capitalisation of internal costs which can be a concern given that there is a temptation to be overgenerous in this department. We investors have to trust the auditors especially considering the materiality of this figure.
Nobody knows what the advertising revenue will be but on a three-year view $15m p.a. is posited as possible. If so the profits thereby generated will be massive – perhaps as much as $10m p.a. This contrasts with the current capitalisation of PTRO of c. $28m at a share price of 53p. TNAV is perhaps a few million USD.
The managers have been successful before and I therefore think it is wise to back them now.
I bought 300,000 shares at 60p last week but quite accept that the price can retreat a bit. If so, I do not mind since this stock is for the patient. (If PTRO fails there will be very little left.) I do not know what the target price should be but by end June, say, it should be smartly higher and on a three-year view we can get anywhere.