SenSen Networks Ltd (ASX:SNS, OTCQB:SNNSF) has delivered another record quarter, banking $3.7 million in cash receipts after securing multiple contracts across all verticals, according to a report by Edison Investment Research.
The company’s ‘land and expand strategy’ continues to drive growth, landing multiple contract wins across all four of its business verticals and multiple geographies.
Analysts at Edison believe that if the company continues this streak, it will be able to reduce the valuation gap versus its peers.
Following are excerpts from Edison Investment’s research report :
Contracts worth at least A$3.8 million
The company’s successful ‘land and expand’ strategy continued driving growth, with contract wins in Q4 FY22 worth a minimum of A$3.8 million from FY23 across all four of its business verticals and multiple geographies
The wins include a new five-year contract with the City of Adelaide for mobile parking enforcement, rolling out its SenGAME solution to an additional 135 tables at Solaire Casino and a three-year contract with Vibe Petroleum at an initial 26 sites for its fuel theft reduction solution.
These wins provide recurring, higher-margin revenues, boosting annualised recurring revenue (ARR) towards $8 million as it made solid progress in transitioning to a ‘pragmatic SaaS’ model.
Valuation: Undervalued versus slower-growing peers
We adjusted its forecasts to account for the increased short-term borrowings, likely higher COGS and opex due to inflation, and quarterly cash flows, moving the FY22e EBIT from A$10.2 million loss to A$12.0 million loss, and FY22e normalised EPS from a 1.67 cent loss to a 1.99 cent loss.
SenSen trades at 3.1x price/sales for FY23e, a significant discount to its peers despite the company’s higher expected growth rates.
Using the average peer price/sales multiple of 4.9x FY23e suggests a share price of A$0.12, a potential upside of 55%.
If SenSen can maintain its momentum in new customer wins and success across geographies and verticals, we expect there could be a reduction in the gap.