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Accesso Technology: As good as the leadership?

Publication Date: 05 Mar 2019 - By Manika Premsingh By Manika Premsingh
Actionable
Differentiated

Equity Fundamental Equity EU ex-UK UK Technology

London's AIM-listed queuing and ticketing technology provider Accesso Technology (LON:ACSO) might have been around for a while, but the stock markets seem to think that it is as good as its leadership. An announcement of a change in the company’s chairman in early February saw a plunge of 38% in its share price.

Tom Burnet, who has been the Chairman for the last nine years, will make way for Bill Russell, who has been in a number of senior roles at Hewlett Packard during the past 23 years. While small cap companies are more vulnerable to personnel changes than bigger, more established ones; it is worth unravelling how far this holds for Accesso Technology.

Strong financial performance

Over the past years, the company has witnessed continued increase in both revenues and net income, and the trend continued in 2018. For the first half of the year, revenues grew by almost 17% to $54m, and operating profits adjusted for depreciation and amortisation grew by over 69% to $11m. While revenue increases have contributed to the increase in, a sharp reduction in cost of goods sold by over 26% has played a significant part as well.

Further, net debt, a measure of sustainability particularly important to relatively smaller sized companies, has more than halved to $11.6m, which is a definite positive.

On the downside, cash from operations are $4.5m in the negative, but going by the company’s past record on total cash flow from operating activities as well as its statement that the first half is “never an indicator of cash generation”; it should not be overly worrying.

Further expansion on the cards

A positive outlook for the company is promising as well. First, Accesso Technology’s geographical growth would be interesting to watch. At present, the bulk of its revenues are generated from the US and Canadian markets, followed by the UK and South and Central America. It also has a presence in Australia and Europe. The company aims at further penetrating existing markets and also expanding into new markets.

Accesso Technology is also increasing its product offerings. In 2017 it installed “accesso Prism”, the technology for the “world’s first 100% virtual queuing based water park”, as per its last annual report.

While the traditional focus has been theme parks and water parks, it is now expanding to similar experiences like ski resorts, cultural attractions, tours and live ticketing events. The only red flag here is the potential cyclicality of demand in offerings, in so far as entertainment is a consumer discretionary segment, which is the first to get hit by slowdowns.

Still pricey

The other red flag is that even with a recent substantial decline in share price, it still remains quite expensive compared to its peers at 65x (ttm). In sum, while the company can make for a good investment, waiting for a more opportune time and lower price to get into the stock might be a good idea.

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

Manika Premsingh

 

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