Osirium Technologies — FY18 growth confirmed

Osirium Technologies (LN: OSI)

Last close As at 04/11/2024

8.00

0.00 (0.00%)

Market capitalisation

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Research: TMT

Osirium Technologies — FY18 growth confirmed

Osirium traded in line with management expectations in H218 and expects to report close to 50% growth in revenues for FY18. The company has signed up customers in new verticals during the year, highlighting the diversity of customer use cases. The growing number of proofs of concept and rate of conversion to sales provides support to our bookings and revenue forecasts.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Osirium Technologies

FY18 growth confirmed

Trading update

Software & comp services

14 January 2019

Price

122.5p

Market cap

£17m

Net cash (£m) at end FY18

2.3

Shares in issue

13.6m

Free float

92%

Code

OSI

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.3)

(5.8)

(20.2)

Rel (local)

(11.2)

(4.5)

(10.5)

52-week high/low

153.5p

118.0p

Business description

UK-based Osirium Technologies designs and supplies subscription-based cyber security software. It has four products: privileged access management, privileged task management, privileged session management and privileged behaviour management.

Next event

FY18 results

March 2019

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Dan Ridsdale

+44 (0)20 3077 5729

Osirium Technologies is a research client of Edison Investment Research Limited

Osirium traded in line with management expectations in H218 and expects to report close to 50% growth in revenues for FY18. The company has signed up customers in new verticals during the year, highlighting the diversity of customer use cases. The growing number of proofs of concept and rate of conversion to sales provides support to our bookings and revenue forecasts.

Year end

Revenue (£m)

EBITDA*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

EV/Sales
(x)

12/16**

0.48

(1.14)

(12.4)

0.0

N/A

32.6

12/17

0.65

(1.61)

(18.1)

0.0

N/A

24.1

12/18e

0.92

(2.00)

(18.4)

0.0

N/A

16.9

12/19e

1.41

(1.82)

(17.4)

0.0

N/A

11.1

Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **14-month period ended 31 December 2016.

FY18 revenues in line with expectations

Osirium expects to report FY18 revenues of at least £0.95m, slightly ahead of our £0.92m forecast and equating to year-on-year growth of 47%. Booking are expected to be significantly ahead of the prior period (our forecast +50% y-o-y). Net cash at the end of FY18 was £2.3m, slightly below our £2.5m forecast. The company noted that the rate of conversion from proof of concept (POC) to sale has increased, and at the start of 2019, had more POCs scheduled for Q1 than occurred for the whole of 2018. We maintain our estimates pending FY18 results in March.

Recent contracts highlight diverse customer base

Osirium has recently announced two contract wins: one for an international financial services provider to secure 400 devices over 39 months and the other for a multinational oil and gas company to secure 400 devices over three years. The company has also signed up a new financial services customer in the Middle East and signed contracts with customers in new verticals including utilities and drinks manufacturing. In December, Gartner issued its first Magic Quadrant for privileged access management (PAM) software – Osirium was one of 14 providers included, and its task automation capabilities were highlighted as best in class.

Valuation: Bookings growth key to upside

As an early-stage company showing revenue growth ahead of its peer group, Osirium is trading at a premium to peers on an EV/sales basis. We have performed a reverse DCF to analyse the assumptions factored into the current share price, using a WACC of 11% and a terminal growth rate of 3%. We estimate that the share price is discounting average annual bookings growth of 24% for FY21–27, break-even EBITDA in FY23, average EBITDA margins of 12.8% for FY21–27 and a terminal EBITDA margin of 36.5%. In our view, bookings growth will be the key driver of share price performance.

Exhibit 1: Financial summary

£'k

2013

2014

2015

2016

2017

2018e

2019e

2020e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

120.0

207.0

290.2

477.6

647.6

922.6

1,406.7

1,957.9

EBITDA

 

 

(366.7)

(327.1)

(377.9)

(1,136.7)

(1,609.4)

(1,995.5)

(1,816.0)

(1,432.6)

Normalised operating profit

 

 

(679.4)

(714.3)

(790.7)

(1,725.6)

(2,296.8)

(2,759.0)

(2,775.8)

(2,581.6)

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Share-based payments

0.0

(184.3)

(56.4)

(96.9)

0.0

0.0

0.0

0.0

Reported operating profit

(679.4)

(898.5)

(847.1)

(1,822.5)

(2,296.8)

(2,759.0)

(2,775.8)

(2,581.6)

Net Interest

(35.2)

5.7

(9.9)

9.7

4.2

2.0

1.0

0.0

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(714.6)

(708.5)

(800.7)

(1,715.9)

(2,292.6)

(2,757.0)

(2,774.8)

(2,581.6)

Profit Before Tax (reported)

 

 

(714.6)

(892.8)

(857.1)

(1,812.8)

(2,292.6)

(2,757.0)

(2,774.8)

(2,581.6)

Reported tax

137.7

134.1

121.0

453.3

409.4

413.6

416.2

387.2

Profit After Tax (norm)

(576.9)

(602.1)

(687.6)

(1,286.9)

(1,883.2)

(2,343.5)

(2,358.6)

(2,194.3)

Profit After Tax (reported)

(576.9)

(758.7)

(736.0)

(1,359.6)

(1,883.2)

(2,343.5)

(2,358.6)

(2,194.3)

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(576.9)

(602.1)

(687.6)

(1,286.9)

(1,883.2)

(2,343.5)

(2,358.6)

(2,194.3)

Net income (reported)

(576.9)

(758.7)

(736.0)

(1,359.6)

(1,883.2)

(2,343.5)

(2,358.6)

(2,194.3)

Basic average number of shares outstanding (m)

0

1

10

10

10

13

14

14

EPS - normalised (p)

 

 

N/A

N/A

(6.61)

(12.38)

(18.12)

(18.38)

(17.42)

(16.21)

EPS - normalised fully diluted (p)

 

 

N/A

N/A

(6.61)

(12.38)

(18.12)

(18.38)

(17.42)

(16.21)

EPS - basic reported (p)

 

 

(296.36)

(144.92)

(7.08)

(13.08)

(18.12)

(18.38)

(17.42)

(16.21)

Dividend (p)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

26.3

72.6

40.2

64.6

35.6

42.5

52.5

39.2

EBITDA Margin (%)

-305.7

-158.0

-130.2

-238.0

-248.5

-216.3

-129.1

-73.2

Normalised Operating Margin

-566.3

-345.0

-272.5

-361.3

-354.7

-299.1

-197.3

-131.8

BALANCE SHEET

Fixed Assets

 

 

815.7

805.2

799.7

1,178.8

1,812.1

2,464.9

2,921.4

3,188.8

Intangible Assets

808.6

795.7

793.3

1,134.5

1,731.9

2,358.4

2,788.5

3,029.6

Tangible Assets

7.2

9.5

6.4

44.3

80.2

106.5

132.9

159.2

Investments & other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

109.3

269.2

428.1

3,953.7

1,646.4

3,161.3

829.8

(1,048.9)

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debtors

77.2

218.6

154.6

380.9

622.6

666.3

801.6

923.7

Cash & cash equivalents

32.2

50.6

273.5

3,572.8

1,023.8

2,494.9

28.1

(1,972.6)

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(235.2)

(294.2)

(365.0)

(648.5)

(857.7)

(1,376.0)

(1,859.6)

(2,413.6)

Creditors

(235.2)

(294.2)

(365.0)

(648.5)

(857.7)

(1,376.0)

(1,859.6)

(2,413.6)

Tax and social security

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(952.5)

(487.6)

(163.3)

0.0

0.0

0.0

0.0

0.0

Long term borrowings

(789.0)

(323.7)

0.0

0.0

0.0

0.0

0.0

0.0

Other long term liabilities

(163.4)

(163.9)

(163.3)

0.0

0.0

0.0

0.0

0.0

Net Assets

 

 

(262.6)

292.6

699.5

4,483.9

2,600.8

4,250.2

1,891.6

(273.8)

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

(262.6)

292.6

699.5

4,483.9

2,600.8

4,250.2

1,891.6

(273.8)

CASH FLOW

Op Cash Flow before WC and tax

(366.7)

(327.1)

(377.9)

(1,136.7)

(1,609.4)

(1,995.5)

(1,816.0)

(1,432.6)

Working capital

66.3

3.8

120.7

226.8

85.5

480.1

351.0

432.0

Exceptional & other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Tax

109.8

48.4

134.6

120.4

291.4

409.4

413.6

416.2

Net operating cash flow

 

 

(190.6)

(274.9)

(122.6)

(789.4)

(1,232.5)

(1,106.0)

(1,051.5)

(584.4)

Capex

(412.8)

(376.7)

(407.3)

(968.0)

(1,320.6)

(1,416.3)

(1,416.3)

(1,416.3)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net interest

(35.2)

5.7

(9.9)

9.7

4.2

2.0

1.0

0.0

Equity financing

0.0

639.3

762.8

5,047.1

0.0

3,991.5

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

(638.6)

(6.5)

222.9

3,299.3

(2,549.0)

1,471.2

(2,466.8)

(2,000.7)

Opening net (cash)/debt

 

 

118.3

756.9

273.1

(273.5)

(3,572.8)

(1,023.8)

(2,494.9)

(28.1)

FX

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

490.3

323.8

0.0

0.0

(0.1)

0.0

0.0

Closing net (cash)/debt

 

 

756.9

273.1

(273.5)

(3,572.8)

(1,023.8)

(2,494.9)

(28.1)

1,972.6

Source: Osirium, Edison Investment Research

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This report has been commissioned by Osirium Technologies and prepared and issued by Edison, in consideration of a fee payable by Osirium Technologies. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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General disclaimer and copyright

This report has been commissioned by Osirium Technologies and prepared and issued by Edison, in consideration of a fee payable by Osirium Technologies. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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XP Power — Revising forecasts to reflect weaker semis sector

As previously flagged, a drop in demand from XP’s semiconductor customers had a negative impact on Q4 revenues and orders. Conversely, demand from all other end-markets remained strong. With FY18 revenues likely to be 2% lower than we had expected, we have revised our forecasts to reflect this and expected weaker demand from the semiconductor sector in FY19. Despite the resulting 5% cut in EPS forecasts for FY19, the stock is trading at a discount to peers, with a superior dividend yield.

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