Leicester City EPL Premiers Players wear Catapult Sport's OptimEye S5 device, page-22

Bell's have a $2.75 valuation from the 29/04/16. This is most of the information direct from the report, apologies that I can't upload the file properly. Personally, I'm looking for a some short term weakness in the market before I buy, whether or not we get any, time will tell.

Q3 update brings more good news
CAT has released a very strong quarterly update with accelerating unit sales, the
signing of a league wide deal and evidence of sales outside its core elite sports
market. CAT delivered a record 2,085 units up 118% on pcp showing its sales team is
performing strongly heading into its peak selling period. It also announced its third
league-wide deal, signing the US National Women’s Soccer League, its first overseas
based deal. Another positive to come out of the release was CAT’s first sales to US
high schools, indicating that its product awareness is growing out of its success within
elite sports and also that its market may broaden out more quickly beyond its core elite
sport market. Operating cash flow was surprisingly positive, however we suspect this is
a timing issue and that it will remain volatile. Overall CAT delivered a very strong
update with the only negative being that its subscription ARPU looks to have declined
slightly.

8,000 units ordered guidance now looks conservative
We are now a month into the all-important Q4 and Q3’s strong 2,085 units ordered
means that to hit its FY16 guidance, CAT needs to deliver 2,508 units guidance which
is 34% growth on pcp. Historically Q4 has accounted for ~36% of sales and CAT’s
guidance would be met this year if it only achieved 31% in Q4. We are forecasting
CAT to deliver 8,200 units and believe that CAT has the potential to exceed this.

Maintain Speculative HOLD, Valuation up 12% to $2.75
Our revenue and earnings forecasts have been trimmed slightly, with increased unit
sales assumptions being offset by lowering of our ARPU assumptions. Given the
announcement of another league-wide deal and initial sales to US schools we are
increasing our terminal growth rate back up to 5% from 4% to account for the
increased longer-term opportunity beyond our 5 year DCF. The net result is an
increase to our Valuation to $2.75 (previously $2.45) resulting in a total shareholder
return of 3.4% which supports our Hold rating. We continue to believe in the long term
growth of CAT, however we also believe that, with a market cap now over $300m, the
market has priced a lot of this in.

Q3 update brings more good news
Q3 highlights
The key highlights from CAT’s 3Q16 update were:
 New record unit orders: CAT delivered 2,085 units ordered during the quarter, up 118% on pcp. This is a significant acceleration in growth on last quarter and unseasonably high indicating that CAT’s sales traction is outperforming;
 8,000 unit guidance now looks conservative: CAT now only needs to deliver 2,508 units in Q4 to deliver its unit guidance which is 34% growth on pcp. Historically Q4 has accounted for ~36% of sales, Guidance would be met this year if it only achieved 31%;
 Another league-wide deal (first overseas): CAT signed a new league wide deal with the US National Women’s Soccer League. It disclosed the deal included 275 units; however it was unclear if these units fell in Q3 or Q4. This marks CAT’s third league wide deal in six months;
 New market in US high schools: CAT has signed 2 US High Schools suggesting the market will broaden out more quickly beyond elite sport.
 Cash flow positive: CAT briefly hit operating cash flow positive in Q1 before raising capital to invest in more sales force which pushed it back into the red. We are surprised to see it return positive so quickly in a seasonally weak quarter for cash receipts, however we suspect this is a timing issue and that operating cash flow movements will continue to be volatile.
 Net cash $7.2m: CAT’s cash balance finished the quarter at $7.2m, with positive operating cash flow offset by some capex associated with product development and unit hardware costs.

Company Description
Catapult Group International (CAT) is Australia’s leading sports data company with over 60 employees across Australia, USA and Europe. It provides elite sporting organisations, teams and athletes with detailed, real time data as well as the analytics to monitor and measure performance of elite athletes in a team or single environment. CAT’s 700+ elite sports clients range from Real Madrid (La Liga) & Chelsea Football Club (EPL) to the Dallas Cowboys (NFL) and San Antonio Spurs (NBA). CAT’s clients also include all AFL, NRL and Australian Super Rugby teams.

Investment view and valuation
CAT’s business model is based on high margin, recurring subscription revenues, with low capex and a strong client retention record. We expect near-term growth to come from ramping up its sales force, increasing its revenue per client through product range growth and software packages, driving its subscription revenue and extending its global sales reach. CAT is well funded with enough capital to transition into profitability and fund its expansion plans. Our Valuation of $2.75 is generated using a DCF. WACC 12.1% and terminal growth rate of 5%. We rate CAT a HOLD (Speculative).

Key risks
Key downside risks include (but are not limited to):
 Company’s operations are in start-up phase and not currently earnings positive: CAT is yet to make a profit from its operations and is not forecast to do so in FY15. There can be no assurance that CAT will not need additional capital in the future.
 Increased competition: The Company’s existing, and potential competitors may include companies with substantially greater resources and access to more markets. Should its competitors develop a superior product, CAT’s future business and financial position could be impacted.
 Risk of technological redundancy: CAT’s technology is protected by patents, licencing and trade secrets, however these protective measures may not be sufficient to protect its competitive advantage. Should competitors commercialise products with superior technology, CAT’s operations and financial performance may be impacted.
 Acquisition integration: Prior to IPO, CAT acquired an Australian competitor, GPSports. There are risks that this acquisition does not deliver the anticipated results. Problems such as staff retention, culture clash and higher integration costs may arise.
 Foreign currency: CAT operates internationally and in a number of currencies. Fluctuations in exchange rates might affect CAT’s profitability and financial position. The main currencies that affect CAT are the USD, Euro and AUD. Any appreciation of the AUD against these major currencies could adversely impact profitability.
 Recruitment and staff retention: CAT’s business model relies on its ability to attract and retain experienced staff to develop and market its products. A failure in this regard may impact the company’s ability to carry out its business plan.
 Planned expansion risks: CAT has identified the US, Europe and Australia as its targeted geographic areas of expansion. While the company has generated revenues in all of these jurisdictions, there is no guarantee that the expansion will be successful.