Business Overview
Tungsten Corp Plc is a London, United Kingdom-headquartered, leading global supply chain enabler which founded the Tungsten Network’s electronic invoicing network in 2000 to help in accelerating global trade for customers.

Recent News
On 5^th February 2020, the company announced that Duncan Goldie-Morrison would step down from the Board on 28 February 2020, and the company expected to find replacement before the end of March 2020.

Financial Highlights – H1 Financial year 2020 (31st October 2019, GBP, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2020, reflecting existing customer price increases, additional product sales to current customers and net benefits of new customer sales, revenue (including TNF) in H1 FY 2020 increased by 4 per cent to £18.2 million as against £17.6 million in H1 FY2019. Representing growth of 6.3 per cent, revenue excluding the results of Tungsten Network Finance grew to £17.9 million in H1 FY2020 versus £17.2 million in H1 FY2019. Excluding Tungsten Network Finance, EBITDA was recorded at £1.2 million in H1 FY2020 as against an EBITDA loss of £0.8 million in H1 FY2019. Operating loss for the period was £2.1 million against an operating loss of £1.2 million in H1 FY2019.

Share Price Performance  

Daily Chart as on 21^stFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 21^st, 2020, Tungsten Corp Plc shares were trading at GBX 35 at the time of writing before the market close (at 12:42 PM GMT), down by 2.78 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 55/GBX 32.21. The stock price has given8.19 per cent returns during the previous year. In the last month, the stock price has given negative 10.25 per cent returns and now stock price is expected to take support at these levels and bounce back from here.

Valuation Methodology


*Peers: Network International Holdings Plc, Eckoh Plc, D4T4 Solutions Plc, Equal Group Plc, Universe Group Plc and All for one Group AG

Conclusion
The company has shown an increase in financial performance in the H1 FY2020 and FY2019. The company’s sales pipeline showed a growth of 300 per cent since April 2019 and generating over 200 opportunities for new sales billing. Due to ongoing uncertainty in the UK economy, the financial services sector is negatively impacted. Failure to win or retain customers could affect the revenue and profitability of the company. Inability to finance its business could hamper its operations. Failure in cybersecurity and critical data breach could affect the overall business of the company.  Through revenue growth and continued cost discipline, it plans to achieve low double-digit EBITDA margin. The company expects to become the invoice delivery platform of choice for current and new suppliers on its global network through the launch of its Total AR solution, which would offer both non-network Buyers and Suppliers the ability to enhance their services.

Over the course of three years (FY16 - FY19), the company’s revenue surged from £25.90 million in FY16 to £36.05 million in FY19, giving annual growth rate of approximately 11.65 per cent on CAGR basis.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 35 (as on 21st February 2020 at 12:42 PM GMT) with high single-digit upside potential based on 11.99x NTM EV/EBITDA (approx.) on FY20E EBITDA (approx.).
 
*All forecasted figures and information have been taken from Thomson Reuters. 

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