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Raising the bar in capital markets risk management

if you’re a professional asset manager, you need top-notch risk management systems to keep tabs on exactly what’s happening at the coal-face in real-time. The big problem is that many such institutions presently have a hotch-potch of legacy systems. Haphazardly assembled over time into a mishmash of point-solutions operating in discreet silos with minimal integration. Making it almost impossible for Chief Risk Officers and/or Directors to assess a firm’s true exposure.

This is where KRM22 fits in. It is 100% focused on the Capital Markets, and is in the process of creating a ‘1st-of-its-kind’ Global Risk Platform. Not only addressing all its clients’ regulatory, market, technology and operational risk requirements, but also materially reducing their costs and complexity.

At today’s interims, the company said that it now had 37 institutional customers (vs 26 Dec’18) and delivered H1’19 turnover of £1.8m (vs £1.3m FY18). Exiting June with Annualised Recurring Revenues (ARR) of £4.1m (vs £1.0m LY & £3.3m Dec’18). Nonetheless the timings of some contracts that were anticipated to be secured over the summer, instead shifted to the right (deferred, not lost) due primarily to the less certain macro environment.

Consequently, we have reduced our FY19 ARR and sales estimates to £5.15m (from £6.67m before) and £4.2m (£5.8m) respectively - with the valuation similarly dropping from 110p to 70p/share, equivalent to circa 3x FY19 ARR. Equally though, there should be no reason why the stock can’t command (at least) a 4.0x rating; worth c. 130p/share – say by Dec’20, based on ARR of £7.25m and closing net debt of £3.96m.