Blue Prism

Blue Prism Group PLC (PRSM) is an AIM listed Robotic Process Automation (RPA) provider, which enables a wide range of customers around the world to intelligently automate their businesses processes, in order to cut costs by automating repetitive tasks and freeing up hours of work. The company’s operations are differentiated in three geographical segments: EMEA Operations, The Americas Operations and APAC Operations. It has two key sources of revenue: Licencing and Professional Services and training. Alastair Bathgate is the Co-Founder and Chief Executive Officer of the group.

Recent Development
On 19 June 2019, the company announced that it has entered into an agreement to acquire Thoughtonomy, which has built a cloud-based AI engine that delivers RPA-based solutions on a SaaS framework, for an aggregate consideration of up to £80m, in a combination of stock and cash. The acquisition would open the mid-tier of the market for the group as it will provide the company with a productised solution which is expected to simplify and broaden access to its connected-RPA platform. The acquisition of Thoughtonomy, in particular, its cloud orchestration tools, resources and skills, will feed into new product initiatives and the group anticipates synergies will be realised by taking advantage of its well-established network of distribution partners in promoting and distributing this product.

Financial Highlights (H1 FY 2019, in £m)

(Source: Company Filings)

Recognised revenue for the period rose by 76% to £40.4mwhile group revenue, under the IAS 18 standard, grew by 82% to £41.6m. Driven by new sales and upsells, the monthly exit run rate, which measures recurring revenue recognised at the last month of the reporting period, recognised as at 30 April 2019 was £7.6m, an increase of £1.4m on the FY2018 MRR of £6.2m. Adjusted EBITDA losses increased to £34.0m from £4.2m, while loss from operations for the period was £35.0m, versus a loss of £5.5m in 1H18.

Valuation Methodology
Method:  EV/SalesApproach (NTM)


Share Price Commentary
 
Daily Chart as at June-20-19, before the market closed (Source: Thomson Reuters)
 
On 20 June 2019, at the time of writing (before the market closed, GMT 1:15 pm), PRSM shares were trading at GBX 1,438, down by 4.19 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 2,635.00/GBX 1,002.00. The company's stock beta was 2.04, reflecting more volatility as compared to the benchmark index. Total outstanding market capitalisation was around £1.42 billion.

Conclusion
The company seeks to make Blue Prism easier to adopt through the new commercial framework which it introduced. The company is well positioned to capitalise on the new growth opportunities, and the Robotic Process Automation continues to develop into a significant software category. The group is targeting the mid-tier and aims to develop its enterprise cloud approach, and the acquisition of Thoughtonomy is an important step to achieve that.
Based on healthy prospects and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 1,438 (as on 20 June 2019) with high single digit upside potential, based on 11.57x NTM EV/Sales (approx.) on FY19E Sales (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters.

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