GIANT strides
Preliminary results ahead of our estimates demonstrate that GIANT, Fusionex (LONDON:FXIF) big data solution, is gaining real traction. Furthermore, it is finding a role in industries and customers where it could see far reaching roll-outs, for example in supermarkets, hotels, airlines and manufacturing. Following the successful Hortonworks IPO in December, a spate of recent big data venture capital fundings and corporate deals, and with the prospect of Cloudera and MapR IPOs on the horizon, we expect investor interest in Fusionex to increase.
Forecasts beaten
Fusionex’s preliminary results for the year ended 31 September 2014 showed that the company can more than deliver against expectations and that GIANT, its big data analytics solution, is gaining real traction. Not only did the company outperform financial expectations, it also exceeded operational objectives – the most obvious being the 12 GIANT contract wins in the nine months between product launch and the year end compared to management’s stated target of 10. While we are impressed and encouraged by these results, we are not adjusting our earnings estimates for now. That said, we do regard the risks to our forecasts as more on the upside than the down.
Finding potentially global applications
It is not simply that GIANT is gaining traction that impresses us. It is the way it is being used in applications, such as supermarkets, hotels and airlines, where it can be rolled out not just across Fusionex’s multinational customers but across global industries. We believe that, as the benefits of using GIANT show through and user adoption grows this could provide a virtuous circle effect in terms of perception with both potential customers and investors.
Reverse DCF: Traction and attractive markets
Our forecasts assume 13 wins for GIANT in FY15e, five behind management’s own target but still greater than a doubling of user numbers. Given GIANT’s progress thus far, it is easy to contemplate the company doubling its GIANT subscriptions each year over the next three to four years. These are the sorts of figures suggested by our reverse DCF analysis of the current (405p) share price (see overleaf). Challenging as they are, we do not regard these levels of growth as unrealistic given the applications, industries and customers that GIANT is finding.
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