AlphaPoint Technology — Update 10 January 2016

AlphaPoint Technology — Update 10 January 2016

AlphaPoint Technology

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Written by

Marla Backer

AlphaPoint Technology

Recent acquisition enhances growth strategy

Technology

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11 January 2016

Price

$0.10

Market cap

$12m

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Share details

Code

APPO

Listing

OTCQB

Shares in issue

118.8m

Business description

Founded in Delaware, US, in 2008, AlphaPoint Technology has transitioned its business following a recent acquisition. It has moved from delivering IT asset management solutions to providing revenue acceleration solutions to large organizations through the performance improvement and effective mobilization of their sales teams.

Bull

STR CEO Dominic Jones, newly appointed chief strategy officer Jim Ninivaggi and other members of STR's senior management team have extensive industry experience.

The company has garnered positive feedback from existing and prospective clients, and is optimistic that its pipeline of new business can lead to multi-fold revenue advances in 2016-18.

STR believes that its SaaS model helping organizations improve sales performance provides a strong competitive advantage that has enabled it to attract a high-profile client base and will facilitate new business development.

Bear

Integration of STR or forming a new alliance with an investment partner could take longer than expected.

Revenue gains associated with the company’s growth investment could lag investment spending.

Competition in the revenue/sales acceleration niche could increase.

Analysts

Marla Backer

+ 646 653 7030

Dan Ridsdale

+44 (0)20 3077 5729

AlphaPoint Technology is a research client of Edison Investment Research Limited

AlphaPoint Technology’s (APPO’s) legacy business has been helping companies manage their IT assets. However, following the recent acquisition of Strategy to Revenue (STR), APPO has transitioned to STR’s revenue acceleration business. Management also intends to strengthen the consolidated balance sheet and targets an OTCQX listing in the near future, following the recent up-listing to the OTCQB. STR’s CEO, Dominic Jones, will continue in his role with the combined company. STR generated c $3.8m in revenue in 2014.

Strategic acquisition to enhance growth

In October 2015, AlphaPoint acquired 100% of UK-based STR for 58.2m shares and a $900k promissory note. STR was founded in January 2009 to provide revenue acceleration solutions to large organizations by helping their sales teams improve performance. STR has a broad range of customers, including high-profile organizations such as Thomson Reuters, Vodafone, HP, Motorola, SAP, Zebra Technologies, Comcast and DHL, among others. Roughly 35% of STR revenue comes from its SaaS-based solutions, SKILLbuild, Predict and POWERsession. These help marketing and sales teams become motivated, better equipped and mobilized on core business initiatives, and improve engagement with customers.

Revenue outlook: Striving for multi-fold expansion

Reflecting positive feedback from existing and prospective clients, combined with STR’s experience and track record, APPO is optimistic that it can boost consolidated revenue from roughly $5.4m expected for 2015 to $25m over its three-year plan and improve EBIT margin from 15% to 20%, driven by both organic growth and M&A. APPO is seeking an investment partner for STR to help finance its three-year plan. Senior industry veteran Jim Ninivaggi joined STR as chief strategy officer in December 2015 to facilitate new business development.

Valuation: History is not a leading indicator

We believe APPO’s historical results do not adequately reflect its future prospects following the STR acquisition. Historically, APPO’s annual revenue has been substantially below STR’s roughly $4-5m level. APPO has essentially become a new Anglo-American company post the STR acquisition. If management can successfully boost revenue to $25m per its three-year strategic plan, this implies that the shares currently trade at only 0.4x on a P/S basis, on prospective revenue.

Historical financial performance

Year
end

Revenue
($m)

PBT
($m)

EPS
($)

DPS
($)

P/E
(x)

Yield
(%)

12/12

0.04

(0.3)

(0.01)

0.00

N/A

N/A

12/13

0.03

(0.8)

(0.01)

0.00

N/A

N/A

12/14 pro forma

3.79

(0.5)

(0.00)

0.00

N/A

N/A

Source: Company reports. Note: 2012 and 2013 financials are historical pre-acquisition whereas 2014 are pro forma results. No consensus forecasts available.

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New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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