The fair ‘equity value upside’ for Cornerstone FS PLC (AIM:CSFS) is 140%-360%, according to Hardman & Co, which has initiated coverage of the group.
At its heart, Cornerstone has a scalable foreign exchange that would it to bolt-on acquisitions. “Discussions with potential targets are ongoing,” the research house said.
There is also the potential to branch out into “multi-currency e-wallets and seamless workflows between accounting systems and payments of all types”, Hardman added in a 33-page note.
Using a discounted cash flow model, Cornerstone is worth £12.2mln, or 62p a share, it concluded. Including acquisitions, the valuation rises £24.6mln, Hardman concluded.
In early afternoon trade the shares were changing hands for 26.4p for a market capitalisation of £5.4mln.
“The core technology platform is a source of competitive differentiation in the SME [small- and medium-sized companies] segment, and this is being evolved to integrate with accounting systems, in turn evolving the revenue streams from transaction-based to subscription-based revenue,” Hardman said in the note.
“Based on our estimates for two scenarios, our DCF-implied fair equity value upside potential ranges from 140% to 360%.”