Exciting times ahead
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics.Despite the stock being rated at a modest 2.2x CY EV/turnover (adjusted for JVs) vs 6.0x for the cyber-security sector, we are encouraged by this morning’s upbeat prelims, improving momentum (H2’18 sales +5.3% vs -1.4% H1), “strong†start to FY19 and the Board’s well balanced ’Growth Strategy.’
There was a slightly better than expected FY18 out-turn, where adjusted EBIT came in 4% higher (17% CC) at £3.3m (margin 12.1% vs 11.9% LY) on revenues up +2.1% (5% CC) to £27.5m. Driving adjusted EPS to 4.7p (vs 2.8p), with net debt closing June at a comfortable £2.7m (vs £3.4m Dec’17) and falling further since the period end - reflecting tight cost control and good working capital management (cash conversion 123% vs 100% LY).
Going forward, the trick to unlocking this hidden value will be re-energising the top line. Grabbing share in its “priorityâ€â€™ verticals where there is greatest near-term opportunity - alongside bolstering those areas where Blancco already enjoys a formidable economic ‘moat’ (eg ITAD). Altogether, feeding through into enhanced economies of scale, more investment available for R&D/S&M, faster growth, superior returns and (in theory) a much higher stock price.
Equally, we’re confident that after a rocky couple of years, the ‘tin helmets’ can now safely be taken off, since the business is gaining real traction with an experienced management team at the helm. As evidenced recently by a slew of new contract wins/renewals with a host of household names. Providing excellent customer endorsements and revenue visibility.
Our valuation has been upgraded from 106p to 140p/share. And, assuming things go to plan, we see no reason why eventually Blancco can’t generate 20%+ EBIT margins in line with peers. Meaning that by FY 2022, the stock even at 140p would still look significantly undervalued – trading once again at a frugal 2.2x EV/sales.
Blancco Technology Group provides data erasure software. Co.'s segments are: Erasure, which enables customers to erase and repurpose IT devices with certified software; and Diagnostics, which provides diagnostics of smartphones and tablets, as well as new diagnostics tools. The erasure division focuses on development and delivery of solutions, includes: Blancco, a provider of data erasure software; SafeIT, which involved in cloud and networked data erasure; and Tabernus, which provides software erasure products. The diagnostics division consists of the Mobile Diagnostics business, comprising Xcaliber Technologies, a smartphone diagnostics software business and its SmartChk solution.
Check Point Software Technologies develops, markets and supports a range of products and services for IT security. Co. offers its customers a portfolio of network security, endpoint security, data security and management solutions. Co.'s solutions operate under a unified security architecture that enables end-to-end security with a single line of unified security gateways, and allow a single agent for all endpoint security that can be managed from a single unified management console. This unified management allows for ease of deployment and centralized control and is supported by, and reinforced with, real-time security updates.
Cyber Bay Corporation is a Philippines-based company, which has an ownership of Central Bay Reclamation and Development Corporation (Central Bay), including its Joint Venture Agreement (JVA) with the Philippine Reclamation Authority to reclaim land along Manila Bay (the Cyber Bay Project) as its property core holding. The Company's Cyber Bay Project encompasses approximately 750 hectares involving the reclamation and development of an integrated urban township. The reclamation project is located Southwest of Manila along Manila-Cavite Coastal Road, within the cities of Paranaque, Las Pinas and the municipality of Bacoor, Cavite.
FireEye provides intelligence-based cybersecurity solutions that allow organizations to prepare for, prevent, respond to and remediate cyber attacks. The company's portfolio of cybersecurity products and services is designed to minimize the risk of cyber security breaches by detecting and preventing advanced, targeted and other evasive attacks, as well as enabling management of security operations, including alert management, investigation and response when a breach occurs. The company provides threat detection and prevention solutions, security orchestration, analytics and management solutions, threat intelligence subscriptions, on-demand and managed service subscriptions, and other services.
Fortinet provides cybersecurity solutions. The company's product offerings consist of its FortiGate product family and its non-FortiGate products. The company's FortiGate hardware and software licenses are sold with a set of security services. These security services are enabled by FortiGuard, which provides threat research and artificial intelligence capabilities from a global cloud network to deliver protection services to each FortiGate appliance. The company's non-FortiGate products include the Fortinet Security Fabric (such as FortiAP, FortiAnalyzer, FortiSwitch and FortiManager), certain cloud security products (such as virtual machines and cloud services) and other products.
GB Group is engaged in the provision of identity data intelligence services. Co. has two operating segments: Identity Proofing, which provides electronic ID Verification services for combating ID fraud, money laundering and under-age gambling, ID Employ & Comply services for employee authentication and screening, and ID Fraud & Risk Management services; as well as Identity Solutions, which provides ID Registration, ID Engage and ID Trace & Investigate software and services that provide consumer information and facilitate understanding, targeting and retention of profitable consumers. Between them, the segments have six complementary lines of business including ID Verification and ID Engage.
Imperva is engaged in the development, marketing, sales, service and support of cyber-security solutions that protect data and applications whether in the cloud or on premises. The company's SecureSphere, CounterBreach and Camouflage product lines secure business-critical applications and data in physical and virtual data centers from hackers and malicious insiders. The company's Payment Card Industry certified Incapsula service delivers cloud-based Website Security, Distributed Denial of Service Protection and Load Balancing and Failover. The company also sells its ThreatRadar services as an add-on services to its SecureSphere appliances, which provides reputation and crowdsourced security intelligence services.
Symantec is a provider of cyber security. The company provides cyber security products, services and solutions to organizations and individuals worldwide. The company's Enterprise Security portfolio includes a mix of products, services and solutions, delivered as part of an Integrated Cyber Defense platform. The company's platform unifies cloud and on-premises security to provide threat protection and information protection across endpoints, networks, email, and cloud applications. The company also provides services, support services, and cyber security services. The company's Cyber Safety solutions from Norton LifeLock help consumers protect their devices, online privacy, identities, and home networks.
Palo Alto Networks provides a platform that allows enterprises, service providers, and government entities to secure their organizations. The company's platform uses a traffic classification engine that identifies network traffic by application, user, and content and provides security across the network, endpoint, and cloud. The company's product, subscription, and support offerings include: firewall appliances and software; and Panorama, which is a centralized security management solution for global control of various firewall appliances and software deployed on an end-customer's network as well as in their instances in public or private cloud environments as a virtual appliance or a physical appliance.
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