92% upside despite loss of Depot contract
​Regenersis provides a suite of product life cycle support services designed to help companies and their customers successfully deploy, protect, sustain, retire and re-use digital technology. Today's trading update says that Group performance for the year ending June 2015 is set to be in line with consensus. This will be despite absorbing another hit from adverse forex movements (mostly due to £ appreciation vs the €, Polish Zloty and EM currencies). Encouragingly, Blancco (propriety 'data erasure' software) is going like a train - posting year on year FY15 revenue growth (in €s) of 27%, accelerating in H2 vs H1, and driving its headline operating profit (HOP) up +45%. However, the Company also reported that post-period its Depot Solutions division had unfortunately lost a pan-European contract with one of its major customers - who we guess is Nokia. For the financial year just finished we have re-aligned our HOP and adjusted EPS figures to £15.3m (from £15.8m) and 17.1p respectively. HOP margins are projected to have climbed nicely from 5.6% LY to 7.5%, reflecting ongoing momentum in Software & Advanced Solutions (S&AS). At yesterday's close of 200p the stock trades on a FY15 EV/HOP multiple of 9.9x (vs a sector average of 13.2x), and a FY17 PEG of only 0.4x. Some of this discount reflects present uncertainties, yet even so we think these ratings look too cheap for such a technology-rich business. That is borne out by our sum of the parts fair value share price at 385p, reduced from 450p.
Regeneus is engaged in the development and commercialization of proprietary adipose-derived stem cell technologies used by physicians and veterinarians to treat musculoskeletal conditions in humans and animals.
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