Senior Research Analyst, Harold Evans, at Singer Capital has provided a positive commentary on Cerillion Plc‘s (LON:CER) recent H1 trading update, highlighting an impressive financial performance and very encouraging prospects for H2 and FY24.
Cerillion Plc, a leading provider of billing, charging, and customer relationship management software solutions, has released a concise but robust H1 trading update that has caught the attention of market analysts. According to the update, Cerillion has achieved a “knockout H1” as sales are up +27% y/y to £20.5m and EBITDA +38% to £9.9m.
Harold notes: Growth is tracking materially faster than consensus expects (FY23e: +16% y/y) and furthermore, EBITDA margins are tracking materially higher (at 48% vs. cons at 42%). In addition, H2 prospects remain encouraging given the £10m contract win in March. CER therefore has very good visibility over FY23e consensus, revenues of £38m, meanwhile EBITDA is tracking even better and arguably towards a material best, perhaps by as much as 18%.
Looking ahead to FY24, the research note states, consensus growth is +16% y/y subject to pipeline conversion. The interesting development is – in addition to the understood theme of larger wins fuelling faster growth, there’s also significant potential within CER’s existing base, as the recent win highlights. More modules/expansions, Evergreen programme, Managed Services, licence upgrades and associated Services as well, so there’s a lot to go after. Harold says ‘even at this early stage – FY24 prospects already look very encouraging’.
On valuation, Singer’s target price is currently £14/share (~3% FY24e FCF yield). Singer notes, should CER’s growth and margin profile persist, FCF should be better (and if so) would suggest £15.30/share. I.e. c.28% medium term upside…and potentially materially more long-term, if Cerillion can become a material player in its huge BSS OSS market. The company is heading that way.
