Kape Technologies – highly cash generative with 2.4m users
Readers will know by now just how much I appreciate companies with growing ARR (annual recurring revenues) – the forward strength that renewed subscription income gives any finance director is a very appealing investment merit for any such company.
And today’s profiled company has an ARR of a massive 86% - I just love it!
Before I start though
First of all - let me ask you just three questions.
Do you understand what is done with your data?
Do you have any control of the data collected from you?
Are you at all concerned over the use of your data?
Your own answers indicate the potential of this company’s business.
Private sphere for each person
This group considers its mission is to ensure that every individual has a private sphere, a digital room of one's own, bringing control back to individuals in an age where privacy has been controlled by a privileged few.
Based in the Isle of Man, Kape Technologies (LON:KAPE) is a cybersecurity company that is focused upon helping consumers around the world to have a better digital experience with greater protection.
Data protection and security
The group is a leading ‘privacy-first’ digital security software provider focussed upon protecting consumers and their personal data as they go about their daily digital lives.
The group, which develops and distributes a suite of digital security and privacy software products in the online security space, has over 2.4m paying subscribers, supported by a team of over 350 people across its eight operating locations worldwide.
Very fast-growing ‘privacy market’
Through its subscription-based platform, the company has established a highly scalable SaaS-based (software-as-a-service) operating model, geared towards capitalising on the vast and fast growing multi-$bn global consumer digital privacy market.
Just last week the group launched its first unified privacy and security suite to its customers. The all-in-one digital freedom, data privacy and system security suite is aimed at providing its consumers with a comprehensive protection solution required to safely navigate their life online.
The CyberGhost - Security Updater, will enable Windows users, initially, to open their devices knowing that the software installed on it is fully updated to their latest version, thereby preventing attacks on their devices due to software vulnerabilities.
Security Updater provides additional information about known vulnerabilities and their impact on the user's security and privacy found in installed software components.
The company claims that its powerful antivirus real-time protection will actively guard against any malicious attacks and viruses, as they describe it ‘a digital vaccine with a 99% efficacy’.
Global operations and earnings
The group’s revenue is generated largely in the US, thereafter in Europe - France, Germany and the UK – while it also derives significant income from the Netherlands, Japan, Australia and Switzerland.
Kape Technologies is viewed as having shown a track record of revenue and EBITDA growth, which is underpinned by a strong business model that leverages its digital marketing expertise.
Recent $100m plus funding
In late October this year the group was pleased with the very strong response to its $100m fund raising from existing institutional shareholders, a number of new blue-chip institutional investors from the UK, USA, Israel and Asia and through PrimaryBid.
That fundraise at 150p a share was significantly oversubscribed, greatly exceeding the initial target raise of $100m. The net proceeds will further strengthen the company's balance sheet ahead of any potential acquisitions that may be contemplated.
But just who owns a 65% share?
Initially there are 210,596,993 shares in issue, in addition, the group holds 10,500,726 shares in Treasury and another 1,200,000 in an Employee Benefit Trust – taking the overall total up to 222,297,719 shares issued, of which Unikmind Holdings holds 65% of the total equity.
As a matter of interest Unikmind Holdings is owned by the Israeli-born billionaire Teddy Sagi.
Aged 49 this entrepreneur created, built up and AIM-floated Playtech, the world’s leading online gaming software company. Having sold down his holding he no longer holds any shares in that company.
Subsequently he built up SafeCharge, the AIM-listed online payment service provider, he sold that off in August last year.
Amongst many other investments Sagi also owns a significant global property portfolio that includes the majority of London’s Camden Market.
Analysts looking for doubled revenue and tripled profit
Progressive Equity Research is estimating that for the year to end December the group will score almost doubled revenue of $120.8m ($66.1m), upon which it will have made almost tripled adjusted pre-tax profits of $30.9m ($10.6m). That should see its earnings rise significantly from 6.4c to 14.2c per share.
The research house goes for next year’s sales to rise to $135.9m, then up to $146.8m in 2022. The profits should increase to $36.4m next year and then $40.2m in 2022, worth 15.8c and then 17.5c per share respectively.
Just like me - they love the ARR
It is impressed by Kape’s latest product launch, suggesting that, by combining its products in this way, the company will continue to offer a compelling end-user proposition, which in turn reduces customer churn and increases the average duration of its customer relationships. That will then drive both revenue and profit in due course.
You see those Progressive Equity Research boys understand about ARR as well.
Trading Update in January
We should be seeing the publishing of a Trading Update for this year in the next month.
The shares peaked in late June this year at 229p. They are now trading at around the 172p level, which is about 16 times current year and 14.5 times prospective earnings.
Certainly not expensive for such envisaged profits growth.
I now set an easy early Target Price of 215p.