Accelerating the transition to a subscription model

Amidst all the recent football hullabaloo, England weren’t the only side scoring from every angle. Team Eleco, an ambitious BuildTech software firm, also “performed extremely well”. Saying that H1’21 turnover jumped to not less than £13.7m, or +13% LFL vs LY (£12.2m) and +9% vs H1’19 (£12.7m). With growth accelerating sequentially from 9% in Q1 to approx 17% LFL in Q2.

We believe the Board’s new strategy has success written all over it. Sure it’s still early days, yet first impressions are promising. In addition, the company plans to fast-track its transition to a full recurring revenue model. By placing greater emphasis on this option in H2, particularly in the US where SaaS adoption is already high.

Our valuation nudges up to 135p/share from 125p, thanks to the improved earnings quality. Moreover the stock trades at a wide-discount to peers, on 3.9x 2021 EV/Revs & 15.7x EV/EBITDA compared to 11x & 30x for the sector. Plus with a 3-5 year view, we could readily see ELCO justify a price of above 200p.