BKS: I always appreciate a Company appraisal written with a negative slant - I'm very optimistic by nature and I really need a contrary viewpoint. BKS looks very capital intensive based on a snap-shot set of results - investment has gone into two new product propositions and a third on the way. Also, each contract win requires up-front capital investment - so funding expansion will clearly require additional capital.
The above analysis, by matching current revenues (that haven't yet benefited from this investment) against the investment spend and concluding that the business model is flawed - is too easy and isn't very helpful. The key question is whether there is a continual need for capital investment and if so does the pricing adequately reflect this?
The writer doesn't appear to understand Beeks business or opportunity at all, which is a shame really as it is the least I'd expect from someone commenting and writing on the company. I would perhaps direct them to the recent investor meet presentation to get a more informed view.
The current cloud opportunity to financial institutions is huge. The revenues are phenomenally sticky, annually recurring and tend to run for many years. The company has gained a distinct momentum now with a key inflexion point reached of being credible & accepted in tier 1 financial institutions as a private cloud provider and will benefit from the herd effect.
The current opportunity does require a reasonable amount of upfront capital on hardware though and management are quite open on this. They took the decision to invest the additional revenue into the business as there is a high operational gearing effect in future years, all noted in the recent contract win RNS's. The extra capital is being addressed in a couple of ways. Firstly by making some changes to contracts whereby money is paid upfront to fund that capital requirement. Secondly by looking to enhance the balance sheet. It could, as the writer says, be an equity raise but they are actually exploring asset financing and debt as well. The former appears to be the preferred option.
So the business invests in growth that plays through as annual recurring revenue. As the investment phase slows down the profits shoot up. In my opinion the business could easily be doing 10p+ of eps in the next 24 months if they so wish. I suspect it is likely to be bought out at some point though. Generally these type of businesses with valuable preferred supplier statuses in top tier financial institutions go for high multiples. I can think of a number in the 40* earnings bracket in recent times.
Of course the writer should know much of this if they had researched a bit more throughly in my view. A disappointing piece.
@ Mark - Happy to join the discord server ; sounds useful but you would need to send me an invite I believe ?
BKS: I always appreciate a Company appraisal written with a negative slant - I'm very optimistic by nature and I really need a contrary viewpoint. BKS looks very capital intensive based on a snap-shot set of results - investment has gone into two new product propositions and a third on the way. Also, each contract win requires up-front capital investment - so funding expansion will clearly require additional capital.
The above analysis, by matching current revenues (that haven't yet benefited from this investment) against the investment spend and concluding that the business model is flawed - is too easy and isn't very helpful. The key question is whether there is a continual need for capital investment and if so does the pricing adequately reflect this?
The writer doesn't appear to understand Beeks business or opportunity at all, which is a shame really as it is the least I'd expect from someone commenting and writing on the company. I would perhaps direct them to the recent investor meet presentation to get a more informed view.
The current cloud opportunity to financial institutions is huge. The revenues are phenomenally sticky, annually recurring and tend to run for many years. The company has gained a distinct momentum now with a key inflexion point reached of being credible & accepted in tier 1 financial institutions as a private cloud provider and will benefit from the herd effect.
The current opportunity does require a reasonable amount of upfront capital on hardware though and management are quite open on this. They took the decision to invest the additional revenue into the business as there is a high operational gearing effect in future years, all noted in the recent contract win RNS's. The extra capital is being addressed in a couple of ways. Firstly by making some changes to contracts whereby money is paid upfront to fund that capital requirement. Secondly by looking to enhance the balance sheet. It could, as the writer says, be an equity raise but they are actually exploring asset financing and debt as well. The former appears to be the preferred option.
So the business invests in growth that plays through as annual recurring revenue. As the investment phase slows down the profits shoot up. In my opinion the business could easily be doing 10p+ of eps in the next 24 months if they so wish. I suspect it is likely to be bought out at some point though. Generally these type of businesses with valuable preferred supplier statuses in top tier financial institutions go for high multiples. I can think of a number in the 40* earnings bracket in recent times.
Of course the writer should know much of this if they had researched a bit more throughly in my view. A disappointing piece.