Pelatro PLC’s (LON:PTRO) aim of achieving double-digit annualised recurring revenues within two to three years “looks very achievable” and should be a catalyst for the re-rating of its shares, according to broker Cenkos.
Analysts at house broker Cenkos issued the note following the AIM-listed company’s trading update on Wednesday where it reported minimal impact from the coronavirus pandemic and unflagging demand from telecoms companies for its customer engagement software.
Visible revenues for 2020 so far of US$5mln, underpinned by a base of US$4.7mln of annualised recurring revenue (ARR), are 25% higher than the broker had been forecasting as of its recent initiation of coverage and cover 67% of the broker's full-year forecast.
“Growth in ARR should lead the company to fully recover its cash cost base, possibly as early as the end of fiscal 2021,” the analysts said.
They added that double-digit ARR “implies solid profitability on recurring revenues alone” and reaching this eventuality “will significantly derisk the investment”.
Looking at the share price valuation, the analysts said the new ARR figure means the company is valued at 3.4 times recurring revenue, based on the latest close price of 45p.
“Fair value in our view lies in a multiple range of 5-7 times, ie a possible doubling or more of the share price,” they said, reiterating their ‘buy’ recommendation.