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Sanderson Group Plc - Reputable Track Record of Growth

Sanderson Group Plc -  Reputable Track Record of Growth

Sanderson is a well established software and IT service provider in the UK. The company has a proven strong revenue model and a reputable track record of delivering both organic and acquisition-led growth. The Sanderson shares climbed 18% during 2017 and we believe the share price has more room to grow. We find Sanderson well poised in the growing multi-channel retail industry not only with its existing business but also with newly acquired Anisa, which complements the enterprise business of Sanderson and should accelerate new customer attractions

The management believes macro economic conditions present the most significant risks. A downturn in the economic environment or consumer sentiment can affect digital retail and enterprise software markets as it directly leads to Sanderson’s existing and prospective customers’ IT spending. While the company has not been hit from any Brexit impact, it remains as a concern should it result in further slow down in the UK economy.
Other risks include people and product development and M&A risks. The business largely relies on its own IPR development and skilled people who specialize in respective areas, both of which have a major impact on building and maintaining longstanding customer relationship. As for acquisition, successful integration of selective acquisitions can play a key role in driving growth.

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September 15 2017

YEAR-TO-DATE PROGRESSING STRONGLY

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We believe these results demonstrate that the company has essentially completed its transition from a software generalist to a DDoS protection specialist, and that the SmartWall DDoS protection product continues rapidly gaining traction in the market.

In this report we review the progress of the group. We also revisit some of the fundamental drivers, and how the DDoS protection market functions. We argue that SmartWall’s real-time threat mitigation represents a disruptive new presence in the space.

KEY INVESTMENT THEMES

Among the main attractions of Corero Network Security Plc (LON:CNS) as an investment:

• A highly differentiated product in SmartWall which offers game-changing performance compared with anything else in the market place. • Substantial headroom for further market share gains, within a continuously growing end market for DDoS protection. • An expanding range of channels to market, and technology partners including Juniper Networks, Gigamon, and McAfee to extend Corero Network Security Plc (LON:CNS) market reach. • Support of a shareholder base that includes specialist institutions such as Miton and Herald Investment Management, and also the Chairman and principal shareholder Jens Montanana.

In this report we examine some of these themes in more detail.

INVESTMENT CONCLUSION

The shares have gained 81% since the successful fund raising in April. Still, looking forward we believe the company could reach revenues of $50m in 3-5 years. This would imply a market cap of £115m based on peer-group multiples (e.g. Radware, RDWR:NSQ), with no further fundraising required in our view, or 4x upside from the current level. If Corero continues to deliver on milestones, there is still everything to play for here for investors.
 

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September 07 2017

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