Eckoh – seamless experiences create more business while its shares look undervalued
As the shift towards greater remote working continues apace, it creates a number of security threats for this group’s clients.
Strong order momentum, especially in new business, has been a marked improvement in the interim period to end September for Eckoh (LON:ECK).
Previously it has focused solely on the UK and US markets, but it now has an increasingly cloud-based security proposition enabling increased activity to come from an expanding international market.
Engage your customers safely
Based in Hemel Hempstead, the £118m capitalised group provides Customer Engagement Security Solutions, which enable enquiries and transactions to be performed on whatever device the customer chooses, allowing organisations to increase efficiency, lower operational costs, while also providing an omnichannel experience for the customer.
Its solutions include advanced interactive voice response (IVR), speech recognition IVR, visual IVR, chatbots, and AI customer service.
The company’s secure payment solutions include: CallGuard, an automated IVR system; DataGuard for payments made over the web or a mobile; ChatGuard for payments made through a web chat or chatbot; EckohPAY, automating recurring payments through secure IVR; Pay by Link, a secure digital payment link; online payments, payment methods, personal customer data, remote agent payments; and payment card industry compliance solutions.
Clients are helped to take payments and transact securely with their customers through all customer engagement channels. The solutions offer merchants a simple and effective way to reduce the risk of fraud, and to secure sensitive data.
Across various sectors in both the UK and the US, Eckoh has an extensive portfolio of large enterprise clients including government departments, telecoms providers, retailers, utility providers and financial services organisations.
The customer engagement industry is already facing new security challenges from the permanent shift towards greater remote working, and a deteriorating global economic environment is likely to only exacerbate the number of security threats.
Halfway advance points to strong year
Last Wednesday the group announced its interim figures to end September. They showed a 33% growth in group revenues at £19.6m (£14.7m), while the group’s adjusted EBITDA was 44% better at £5.0m (£3.5m), lifting earnings per share up 32% to 1.06p at the halfway.
The group’s CEO, Nik Philpot, stated that:
"These are a great set of results, showing the anticipated strong progress in key areas. I am particularly pleased with the increasing organic and overall levels of ARR and contracted orders. They reflect our organic growth, the successful integration of Syntec, strong growth in the key North American market, and the ongoing momentum from cloud deployments."
The group’s interims show that it is on track to deliver some material growth in the current year. Importantly what came through was the strength of the North American business.
There are some 292.6m shares in issue.
Larger holders include Canaccord Genuity Wealth Management (16.74%), Liontrust Asset Management (14.04%), Chelverton Asset Management (6.24%), Herald Investment Trust (5.49%) and Blackrock Investment Management (4.45%).
Broker’s Views – a Price Objective of 80p
Brokers Singer Capital Markets have current year estimates to end March 2023 for £40.0m revenues, up from £31.8m, while adjusted pre-tax profits are set to rise from £5.2m to £7.6m, with earnings of 2.0p (1.6p) and dividends of 0.70p (0.67p) per share.
Already they have pencilled in further growth in the coming year with £43.2m revenues, £8.3m profits, 2.0p earnings and a 0.80p dividend per share.
At Canaccord Genuity Capital Markets, their analyst estimates £40.5m current year sales, with £7.3m adjusted pre-tax profits, worth 1.91p in earnings and amply covering a 0.80p dividend per share.
The brokers are going for a Price Objective of 80p compared to the current 40p in the market.
Both sets of brokers agree that there are significant cross-selling opportunities for the group as both its operational base and its service offerings expands.
My View – setting a Target Price at 50p
The very positive tones emitted from the Interim results shows that the shares are undervalued and capable of very good growth in the next year or so.
At the start of 2022 this group’s shares were trading at around 52.5p, since when they have been as low as 36.2p, which was just a couple of weeks ago.
Now at 40p, I do feel that the current year’s prospects will help to increase the group’s share price.
I will now set a Target Price at 50p, which could well be achieved early in 2023.