Craneware PLC (LON: CRW)

Craneware PLC (LON: CRW) is an FTSE AIM 100 Index listed company, focused on the licensing and development of computer software for the healthcare industry. CRW serves around one-third of registered hospitals in the U.S. It is a market leader in the value cycle solutions that assist hospitals in enhancing their financial performance.

Recent trend of dividend payments

The Company has a progressive dividend policy to pay out to shareholders, and it will pay an interim dividend of 12.50 pence per share on 15 April 2022, while the ex-dividend date was 24 March 2022. In comparison, the Company had paid an interim dividend of 12.00 pence per share for an equivalent period of the prior year.

(Source: LSE, chart created by Kalkine Group) 

Growth Prospects

• Record Annual Recurring Revenue: The Company had achieved a record annual recurring revenue of approximately USD 165 million as of 31 December 2021. In comparison, it was USD 64.50 million as of 30 June 2021. Meanwhile, the contribution of ARR from the cloud increased from 16% as of 30 June 2021 to around 67% as of 31 December 2021.
• Acquiring New Customers: CRW would aim to acquire non-overlapping customers, which will create further cross-sale opportunities. Moreover, the Company had completed its first cross-group sales during H1 FY22.
• Increased Popularity of Trisus Application: CRW had increased the number of hospitals by 26% to 1,134 on the Trisus platform during H1 FY22.

Key Risks 

• FOMC Meeting Minutes: The Federal Open Market Committee's meeting minutes indicated that the Federal Reserve is preparing to move aggressively to head off inflation.
• Record UK Inflation: British inflation hit a 30-year high of around 6.2% in February 2022, which may cause a further interest rate hike.
• Ukraine Tension: The mounting concern over the Russian invasion of Ukraine can continue to weigh on the equity market.
• Intellectual property risk: Any failure to protect and register Intellectual property rights may adversely impact the CRW’s future business performance.
• Regulatory Environment: Since CRW is operating in highly regulated industry and markets, any violation of compliance may lead to reputational damage and loss of business.

Key Fundamental and Shareholders Statistics of Craneware PLC.

Liontrust Investment Partners LLP is the most significant shareholder as it holds nearly 4.61 million shares as of 31 March 2022.               

H1 FY22 Financial Highlights (for the six months ended 31 December 2021, as of 14 March 2022)

(Source: Company Filings)

• Top-Line Business: The Company’s top-line revenue grew by around 111%, from USD 38.00 million during H1 FY21 to USD 80.20 million for H1 FY22.
• Profitability: On the profitability front, the adjusted EBITDA witnessed an excellent year-on-year jump of around 78% during H1 FY22.
• Balance Sheet: Post the acquisition of Sentry, the net debt stood at USD 72.9 million as of 31 December 2021.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 07 April 2022 at 08:50 AM GMT+1, CRW’s shares were trading at GBX 1,800.00, same as the previous day’s closing price. Stock’s 52-week High and Low were GBX 2,830.00 and GBX 1,550.00, respectively.

On a daily chart, the stock price is sustained above the 20-days exponential moving average of GBX 1,707.88. Hence, there could be an uptick in the stock price in the near term. Moreover, the MACD line has given a bullish crossover against the signal line.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

Craneware had shown resilient top-line business performance during H1 FY22, with the achievement of record Annual Recurring Revenue. Moreover, the Company has a strong financial foundation with high customer retention rates and a strong balance sheet. The Company would seek to unlock the considerable cross and upsell opportunity within the existing customer base over the medium term. In a nutshell, the Company would continue to seek further market opportunities to enhance its sales pipeline and drive long-term growth for the shareholders.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the expansion of Trisus Application, consistent revenue and profitability growth, interim dividend growth, cash-generative business model, robust financial performance, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Craneware PLC at the current market price of GBX 1,800.00 (as of 07 April 2022 at 08:50 AM GMT+1), with lower-double digit upside potential based on 29.92x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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