SHIFT (TYO:3697) - Fundamental Investment Case

Robust FY 8/19 earnings were defined by existing business strength. Specifically customer growth, project growth & rising average project sizes.

SHIFT is literally turning business away as the merits of outsourced software testing, including accuracy, quality, speed & costs, are starting to be understood by an expanding client base.

Having worked on over 3,500 projects for over 1,000 clients SHIFT is undoubtedly Japan’s leading outsourced software testing operator. Yet in reality just 1% of software testing is currently outsourced, a figure we expect to rise as the benefits of using a specialist operator become more widely understood.

A key previous concern had been the issue of a MS warrant, but having been 100% converted the risk of ongoing dilution has gone with further financing to be achieved through debt.

Whilst acknowledging a degree of margin volatility is likely as funds raised are used for M&A, we believe SHIFT is in an exceptionally strong position to capitalise on its status as STaaS (Software Testing as a Service) market leader amidst a continued embrace of software to improve efficiency.