In light of the fears over Brexit, US/China trade tensions and slowing Eurozone growth, it’s not surprising that even the highest quality stocks have been ‘thrown out with the bathwater’ during the recent correction. However, for risk-tolerant investors, volatility creates opportunity, particularly for those top notch businesses enjoying wide ‘economic moats’, long term tailwinds and priced at attractive levels.
Take Elecosoft, whose award winning software is ‘disrupting’ the $10 trillion global construction market. This morning in a positive RNS the firm said that - despite macro uncertainties & adverse forex moves (re weaker SEK vs £) - its 2018 results are set “to be significantly higher than 2017, and comfortably in line with expectations”.
These record numbers being driven by new customer wins, alongside a service-centric approach, delivering high renewal rates and excellent end-user training/support. Moreover, we estimate that recurring revenues (incl SaaS) now account for >55% of the group - providing robust visibility for 2019 & beyond.
Looking ahead, we retain our forecasts (adj 2018 PBT of £3.5m on £22.3m sales) & 115p/share valuation – whilst are also encouraged to hear that the Shire Systems (Jul’18) and Active Online (Nov’18) acquisitions are bedding down nicely and hitting targets. Plus, at 72p the stock (down c.15% over past 4 months) appears cheap vs BuildTech peers across all major benchmarks.
