"DSE released its 1Q trading and cashflow in mid-April and we...

"DSE released its 1Q trading and cashflow in mid-April and we hosted a briefing with management last Friday. The three things that stood out to us were:

1) ARR growth continues to be strong with no evidence of any macro slowdown;

2) Gross margins are tracking ahead of expectation and the FY23 target (~66%) looks likely to be exceeded; and

3) that DSE continues to execute flawlessly across scaling, its go-to-market and new product innovation.

DSE represents a rare combo of both strong growth (+50% YoY) whilst being profitable and cashflow positive. It is advancing high-conviction M&A opportunities and is well funded with a cash balance of $22.7m and no debt.

DSE is a top pick. Reiterate Buy.

Recommendation
We reiterate our Buy rating and increase our PT to 34c (30c prior).

The key driver of PT increase has been higher forecast cashflows. On our forecasts, DSE is currently trading on an FY23 EV/Revenue multiple of 5.7x while our PT implies 7.4x."

https://dropsuite.com/wp-content/uploads/Shaw-and-Partners–April-2023.pdf.pdf