Beeks Financial Cloud Group PLC

Beeks Financial Cloud Group PLC (LON: BKS) is a FTSE AIM All-Share index listed cloud computing, connectivity, and analytics provider for financial services.

Rationale for Valuation – SPECULATIVE BUY at GBX 156.60

• Excellent Trading: BKS started FY22 with three significant contract wins worth nearly US$5 million, which has boosted the confidence. Hence, the Company is in great shape to capitalize on its growing sales pipeline and bright market opportunity.
• Promising Outlook: BKS has accelerated investment in Proximity Cloud and sees significant market opportunity in the medium-term.
• Economic Recovery: British factory orders jumped significantly, while the GDP estimates for the US in the third quarter has increased on stronger personal spending. It is boosting hopes for a swift economic recovery.
• Technical Indicator: From a technical standpoint, the momentum oscillator 14-day (~28.94) indicating an oversold scenario, while the stock price is hovering close to the lower Bollinger Band.
• Undervalued Multiples: On a forward 12-month basis, key valuation multiples – EV/Sales, EV/EBITDA, and Price/Earnings, are undervalued against the average of the Technology industry.

Key Risks

• Pandemic Impact: Omicron variant may impact the business operations in the short term. Moreover, the reintroduced restrictions in Austria and rising cases in Europe can reverberate in other operating territories and hamper the growth trajectory.
• Macroeconomic Uncertainties: The macroeconomic instabilities and inflationary concerns can impact the consumers’ disposable income and spending habits.

Trading Update (as on 27 September 2021)

• Strong Momentum: BKS witnessed significant contract wins and was encouraged by the newly launched Proximity Cloud offering.
• Record Sales: It recorded the sales of over $5 million of total contract value through July, August, and September 2021, which exceeded the management expectations.
• Guidance: FY22 revenue is likely to surpass the current market expectations.

Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

Conclusion 

BKS performed significant against its strategic priorities in the opening quarter of FY22. Therefore, it expects to outperform the current market expectations. It has a robust recurring revenue and sales pipeline to stay resilient and take advantage of growing demand for cloud computing and connectivity from financial services organizations. The stock made a 52-week High and Low of GBX 210.00 and GBX 86.50, respectively.

Based on the enlarged offerings, strong recurring revenues, growing sales pipeline, and support from the valuation as done using the above method, we have given a “SPECULATIVE BUY” recommendation on Beeks Financial Cloud Group PLC at the current market price of GBX 156.60 (as on 29 November 2021 at 08:05 AM GMT), with lower double-digit upside potential based 56.92 Price/Earnings (approx.) on FY22E Earnings Per Share (approx.).

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

Disclaimer 

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