# Big Technologies “well positioned to take market share in a large and growing market” says Zeus Capital

- Link: https://www.directorstalkinterviews.com/big-technologies-well-positioned-to-take-market-share-in-a-large-and-growing-market-says-zeus-capital/4121046656
- Published: 2022-01-24T11:42:52+00:00
- Author: Amilia Stone

**Big Technologies plc** (LON:BIG) expects to deliver 2021 and 2022 results ahead
of expectations and we believe the company’s expectations for 2022 are conservative.
We believe BIG will continue to deliver strong growth, supported by disruptive technology
and a proven management team. We also believe BIG can sustain high margins and deliver
reliable earnings, supported by high operating leverage and long-term contracts.

**2021 results slightly ahead**: Revenue is expected to be at least £36.5m, slightly
ahead of our original estimate of £36.2m. Adjusted EBITDA is expected to be slightly
ahead of market expectations (£20.2m). Net cash is expected to be c. £48m, c. 4%
ahead of our estimate of £46m. Strong net cash indicates cash conversion was strong
and we estimate c. 79% cash conversion of EBITDA in H2 2022 (see overleaf).

**Upgrade to 2022**: Big Technologies expects to deliver yoy revenue growth in 2022
at a similar rate to that achieved in 2021 (over 23%) and further expand EBITDA 
margin in 2022. As a result, we lift our 2022 revenue forecast by 4% and Adjusted
EBITDA by 5% to £45.5m and £25.0m (55.1% margin), respectively.

**Conservative outlook**: We believe BIG can achieve 2022 results based on its existing
contract base and without any new customer signings. Run rate revenue at the end
of 2021 was £38m and potential revenue from recently awarded contracts was £8m. 
This total contracted revenue of £46m is already in line with upgraded 2022 revenue
estimates (£45.5m). In terms of EBITDA expectations, our revised estimate conservatively
assumes only marginal increase in margins (+0.5%) despite the inherent operating
leverage in BIG’s model on the 24% increase in revenue.

**Investment case**: We believe Big Technologies is well positioned to take market
share in a large and growing market. The company has disruptive technology, proven
management team, accretive acquisition opportunities and high revenue visibility.
BIG is setting new standards in reliability, security, ease-of-use and accuracy,
proving local authorities with fewer false alerts and lower operating costs. BIG
believes its products are three years ahead of competitors, some of which remain
services-focused, charging per call out. Our DCF analysis indicates a mid-point 
valuation of 334p. Longer term, we see a scenario where BIG could double 2021 Adjusted
EBITDA and support an EV of 399p over time. In addition, we see highly accretive
acquisition opportunities in the fragmented and technologically-lagging EM sector.
We estimate each £100m investment in acquisitions could add £300m of net incremental
value, taking potential intrinsic EV to 503p.

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