‘All systems go’ at super-durable, BuildTech stock
H2 has started well, albeit as the company aggressively transitions from perpetual licensing (23.5% of H1’21 turnover, up 8% vs H1’19) to recurring revenues (55%, and +10% vs H1’19), this will inevitably temper top and bottom line progression. It will involve longer sales recognition and greater upfront investment (all self-funded) in order to later reap the rewards of predictable and more profitable income streams (eg SaaS). By switching from a product-led to a customer centric organisation, we believe this perfectly positions the group to flourish in the new cloud & digital age.We think the Board is doing all the right things - and have raised our valuation from 135p to 150p/share, thanks to the improved earnings visibility, CLVs and the risk/reward profile.
Moreover the stock trades at a considerable discount to peers, on 4.1x 2021 EV/revenues and 17.5x EV/EBITDA compared to 9.7x and 28.5x for the sector. Eventually this gap should close, which over a 3-5 year period, could (in theory) propel the price substantially higher.
Elecosoft is a provider of integrated software applications and related services to international architectural, engineering and construction marketplaces and property management industries. Co. develops its specialist software through its own development teams in Sweden, Germany and the UK. Co. services its customers directly in its primary markets of Sweden, Germany, Benelux, the U.S and the U.K and indirectly to its non-core markets through a network of channel partners.
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