Pelatro targets expanding data monetisation market

What it does

Pelatro PLC (LON:PTRO) is a customer engagement software house which processes information designed to turn phone users into repeat customers of telecoms firms and mobile networks.

Integral to those efforts is the mViva suite of products that provide contextual marketing, loyalty, data monetisation and unified communications solutions to international names such as Telenor, Axiata and Singtel.

The need for the company’s technology is becoming increasingly relevant given the proliferation of electronic devices into daily human life, and by extension, the vast quantities of data generated.

How it’s doing

Pelatro has been steadily expanding its client base in recent months, with one of its customers expanding a business consultancy engagement to a full managed services contract in June which is expected to generate approximately US$2mln of revenue for the group over the next five years.

This was followed in September by another contract expansion, this time with a large telco firm, which is expected to add around US$1.5mln in revenues over a five year period as well as to enlarge the firm’s recurring revenue base.

The latter contract accompanied the firm’s results for the first six months of 2020, where it reported adjusted earnings (EBITDA) of US$0.66mln compared to US$0.81mln in the prior year, while revenues stood at US$2.29mln, down slightly on the previous year’s figure of US$2.71mln.

Non-executive chairman Richard Day said the company will “continue to develop new and innovative products” and it remains focused on increasing its annual recurring revenue, which in its outlook statement was reported as US$5mln for the full year, including US$2.3mln for the first half.

Pelatro also reported that its 2020 pipeline stands at US$8mln, of which US$4mln is from existing customers for various new modules and products.

The company also said it anticipates “significant weighting of revenue towards the second half”.

Pelatro also has additional cash to fund its aspirations, raising £2.1mln through a placing and subscription of shares in early August.

What the broker says

In a note in June, analysts at Cenkos Securities reiterated their ‘buy’ rating on the stock and said Pelatro’s aim of achieving double-digit annualised recurring revenues (ARR) within two to three years “looks very achievable” and should be a catalyst for the re-rating of its shares

“Growth in ARR should lead the company to fully recover its cash cost base, possibly as early as the end of fiscal 2021,” the analysts said.

They added that double-digit ARR “implies solid profitability on recurring revenues alone” and reaching this eventuality “will significantly derisk the investment”.