Turbo-charging growth prospects

In recent years Rosslyn has meticulously built a leading Big Data & spend analytics SaaS platform (RAPid), supporting an illustrious roster of 100+ clients (many global multi-nationals). Topped off with the synergistic acquisition of Langdon in Sept’19, & becoming EBITDA positive in FY’20 for the 1^st time ever - thanks to increasing ARR (+12% to >£6m) & favourable operational leverage (81% gross margins).

Today shareholders approved the heavily oversubscribed £7.3m placing at 5p. How many businesses can claim to have raised >70% of their market cap at a 22% premium to the preceding 20 day average? Indicating strong institutional support for future prospects.

The company plans to invest the funds to further accelerate the top line, launch new products (eg Master Data Management), bolster the balance sheet & maybe even execute one or two more opportunistic bolt-ons. A proven formula, that aims to triple revenues over the next 3 years (including M&A), whilst maintaining tight cost control and lifting profit margins.

FY20 turnover came in at between £7.0m-£7.2m (vs £7.0m LY) despite some year-end disruption related to the pandemic, alongside the strategic decision to curtail low margin ‘pass-through’ revenues. The platform is highly scalable, because once a client’s upfront configuration has been completed the software is essentially identical from an operational/cost perspective, working off a ‘1-to-many’ model. 

In light of RDT’s cutting edge technology and attractive expansion, we value the stock at 9.5p/share, equivalent to c. 3.4x FY21 EV/sales. As such, we believe the firm offers compelling value for patient risk-tolerant investors.