From recovery to growth
Comptel Oyj's (HEL:CTL1V) plans to reinvigorate growth should be enhanced by the development of a new generation of analytics-enabled products and the strengthening of its indirect channel through the Tech Mahindra relationship. While sales declined in H1, deal flow and order intake paint a more encouraging picture. We forecast a return to growth in H2, while continued commercial momentum could prompt upgrades for FY15.
Positive trend in bookings and margins
While H1 sales fell by 8% year-on-year, order intake and deal flow are the key indicators of momentum in the business and both look encouraging. We estimate that order intake is up c 8% y-o-y over the past 12 months, with the company winning five new customers in H1 and signing nine significant (€0.5m) deals. Two €1m+ deals have also been announced since period end, giving confidence of further forward progress in the typically seasonally quiet Q3.
Building blocks for a return to growth being laid
The analytics offering has been expanded to enable the prediction of network issues and customer behaviour, while integration of analytics into other products gives the company a suite of products for intelligently automating a range of business and operational support tasks. Meanwhile, the partnership with Tech Mahindra gives the company a promising channel to capture share of large BSS/OSS transformation deals with its Fulfillment solution.
Financials: Operationally geared recovery potential
Our flat FY14 revenue forecasts imply a return to y-o-y growth of 12% in H2. Key growth initiatives such as the Tech Mahindra partnership and the launch of Policy Control and Charge V5 with integrated analytics could drive upside to our 3% growth estimate for 2015. With operational gearing and R&D offshoring enabling further cost efficiencies, upside should drop through strongly into earnings. Good execution could drive margins to the mid-teens level on a three- to four-year view, which, if achieved, would result in a robust double-digit earnings CAGR.
Valuation: A recovery in growth key to upside
On the basis of current estimates, Comptel’s 14.4x FY15 P/E looks fair, being in line with peers. However, stronger recovery in growth should deliver operationally geared earnings upside, and potentially a re-rating upwards. Visible success with the analytics products could be a particular catalyst for a higher rating.
To Read the Entire Report Please Click on the pdf File Below