- Pro forma Ebitda (cash profit) doubles to $78 million on an 89% increase in revenue of $231 million
- Webselenese acquisition drives 52% organic revenue growth in 2021
- ExpressVPN Acquisition for $936M Completes in December 2021
- 20 percent underlying growth in customer base to 6.5 million
Cybersecurity software provider Kape Technologies (KAPE: 403p) couldn’t be in a better position to exploit the current 17 percent annual growth in the digital privacy and security market. Digital data theft skyrocketed during the pandemic and consumers now need to protect themselves from potential Russian cybersecurity threats as well.
Following the $936 million acquisition of ExpressVPN, a leading provider in the digital privacy space with more than 3 million active users in 180 countries, and after accounting for a 20 percent growth in its customer base last year In the past, about 47 percent of Kape’s subscription revenue is derived from North America and 35 percent from Europe. These are affluent regions that are key targets for online fraudsters, so it’s no surprise that the adoption of Kape’s cybersecurity software (which protects data security and privacy from hacking and phishing attacks) and Virtual private network (VPN) solutions (which encrypt and protect Internet connections) have been on the rise. Structural growth is also driving consumer demand, such as double-digit annual growth in the number of personal Internet of Things (IoT) devices.
These factors explain why Kape’s retention rates exceed 80 percent. Kape is also successfully exploiting cross-sell and up-sell opportunities with its expanded customer base. For example, 12 percent of new Cyberghost (VPN) subscribers and 20 percent of Intego (antimalware protection software) purchase more than one product when they sign up. There is a great opportunity to replicate this with ExpressVPN, which already enjoys high customer satisfaction ratings.
|Performance of the Simon Thompson Bargain Stock Portfolio in 2017|
|Company Name||ITDM||Opening offer price on 02.03.17 (p)||Offer price on 03.22.22 (p) or starting price (see notes)||Dividends||Trotal return (%)|
|Kape Technologies (formerly Crossrider)||KAPE||47.9||400||3.55||742.5|
|Chariot Oil & Gas (see note one)||CHAR||8.29||10.6||0||248.2|
|BATM Advanced Communications (see note seven)||BVC||19.25||51||0||184.4|
|Cenkos Securities (see note two)||CNKS||88,425||106||9.5||30.6|
|Manchester & London Investment Trust (see note three)||MNL||291.65||377||3.0||28.4|
|Management Consulting Group (see note five)||CMM||6,183||6||0||-3.0|
|Bowleven (see note four)||BLVN||28.9||5.5||fifteen||-6.1|
|Tiso Blackstar Group (see note six)||TBG||55||20.4||0.54||-61.8|
|Total return on all FTSE shares||6485||8349||28.7|
|Total return on all FTSE AIM shares||977||1201||22.9|
1. Simon Thompson advised selling a two-thirds stake in Chariot Oil & Gas at 17.5 pence on April 3, 2017 (“Trading Shares at a Teardrop,” April 3, 2017). Subsequently, Simon advised taking part in the open offer of one for 8 pence to 13 pence a share (“On the beat of earnings”, March 5, 2018) and buying back the shares sold at 4 pence (“The North African Adventure of Chariot”, April 17, 2019). Simon then advised accepting the open offer of one for six at 5.5p (‘Exploiting Safety Margins’, Jun 1, 2021). The total return reflects these transactions.
2. Simon Thompson advised to sell the Cenkos Securities stake at 106 pence on 3 April 2017 and the price of 106 pence shown in the table above is the starting price of the stake (“An Increase in Profitable Earnings”, April 3, 2017). Please note that Simon has since listed the shares in its 2020 Offered Stock Portfolio and continues to rate the shares as a buy.
3. Manchester and London Investment Trust paid full dividends of 3 pence per share on May 2, 2017. Simon Thompson then advised selling half of the stake at 366.25 pence on June 26, 2017 (“Top slicing and running profits “, June 26, 2017), and selling the remaining half at 377 pence (“Bargain Stocks Second Chance,” August 17, 2017). The price of 377p indicated in the table is the final starting price.
4. Simon Thompson advised bank profits on half of his Bowleven holdings at 33.75 pence (“Hitting pay dirt,” 9 Apr 2018). The company subsequently paid a special dividend of 15 pence per share on February 8, 2019 and the balance of the holding was sold at 5.5 pence (‘Take Accounts and Profits’, December 9, 2019).
5. Simon Thompson advised selling Management Consulting shares at 6 pence in February 2018 (“How the 2017 Bargain Stock Portfolio Fared,” February 2, 2018). The price indicated in the table is the starting price of 6p.
6. Tiso Blackstar transferred its UK listing to the Johannesburg Stock Exchange. The shares were then delisted on 23 November 2020 when shareholders received an exit cash payment of R415 per share upon cancellation of their shares.
7. Simon Thompson advised bank profits on half of his holdings in BATM shares at 49.9 pence (“Bargain Shares: Exploiting Price Anomalies and Higher Cut,” Dec. 3, 2018) and subsequently repurchased the shares. shares at 43.5 pence (“BATM armed for a re-rating’, July 11, 2019).
Source: London Stock Exchange.
Additionally, with the benefit of anticipated cost savings of $19 million this year and continued organic growth, analysts expect Kape’s annual cash earnings to double to $169 million on revenue of $618 million. On this basis, expect free cash flow of $134 million to dent net debt of $458 million.
Kape shares have outperformed the FTSE Aim All-Share Total Return Index by 18 percent since I covered the half-year results (‘Bargain Stocks: Tech Stocks Rise’, September 20, 2021), and have risen 742 percent in my entry price in my Portfolio of Trading Shares 2017. A prospective business valuation at cash earnings multiples of 13 times remains low for a high-growth cash-generating technology group. I keep my goal of 500p. Buy.
■ Simon Thompson’s latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by calling YPDBooks on 01904 431 213 to place an order. The books are sold through no other source and are priced at £16.95 each plus postage and packing of £3.25 [UK].
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