BTH 3.33% 15.5¢ bigtincan holdings limited

"Reminds me of an early DTL." Maybe. Hard to know for sure. I...

  1. 16,379 Posts.
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    "Reminds me of an early DTL."

    Maybe. Hard to know for sure.

    I sometimes find it difficult to know which IT services company has a service offering that is durable and can withstand competition or avoid obsolescence.

    The reason I remain a long-term shareholder in DTL is because that company has demonstrated an uncanny ability to remain relevant to its customer base and to re-invent itself when the need arises.

    Whether BTH will grow up into such a company remains to be seen, so its not something about which I can offer an opinion.

    But one thing I will say is in comparing BTH to that other company about which you asked me the other day:

    BTH's Annual Recurring Revenue are three times higher than that other company.
    Yet BTH's Market Cap is only a third-higher.

    And I suspect BTH will not be as perpetually capital-hungry as that other company has been (and for a considerable period of time, at that).

    So if I was forced to choose between the two, my choice would easily be BTH.
    Just on apparent relative valuation appeal alone.

    But whether I'd contemplate buying BTH in its own right right now, I don't think so.
    I'd rather stick with my tried and tested Data#3 whose Enterprise Value is just 2.5 times that of BTH, but DTL has been profitable for decades, and today generates over $40m in EBIT.

    I can't see BTH achieving near that level of earnings for some time to come because, although the top line is growing fast, I sense that ongoing increased investment in costs to drive those higher sales will stil be required for a few more years before the business reaches the required scale at which cost overheads can be fully "fractionalised".

    (PS. Hint: While BTH has a meaningful net cash position of $27m, investors should resist thinking that cash is freely available. Because the company's accounts show Deferred Revenue Liabilities totalling $18m, $15m of it being Current, so much of that cash will be consumed in the current 12 months in servicing those Deferred Revenues. Just something to bear in mind when it comes to thinking about the capital adequacy of the company.)

    .
 
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