Fusionex shares fall by a third as results divide analyst opinion

Shares in Fusionex International fell to their lowest level since their 2012 flotation after results that divided opinion.

The Malaysian software developer, which specialises in the buzzy areas of Big Data and the Internet of Things, generated revenue of 77m Mayalsian ringgit (£12.5m) in the year to 30 September, growth of 35% on the previous year.

Gross profits of MYR 58.9m were up 33%, while profit before tax of MYR 25m was up 28% on the period year, with EPS growth of 28% to MYR 0.58.

Profit was flattered by higher capitalisation of development costs which rose MYR 5.3m over the prior year, some analysts noted, rising as a percent of sales from 19.5% to 21.4% over the prior year.

Fusionex's main product is Big Data analytics software, GIANT, which has enjoyed a strong take-up during the year of 36 customers, including blue chip global organisations and government agencies.

The balance sheet displayed cash and equivalents of MYR 57.7m at the year end, since boosted by a significantly over-subscribed £14m placing in London at a price of 325p.

"The new financial year has started on a very strong note with good new wins already secured for GIANT," said chief executive Ivan Teh, "coupled with a very strong pipeline, and therefore the outlook for 2016 and beyond is very positive and exciting for Fusionex."

October's fundraising was carried out by broker Panmure Gordon, where analyst George O'Connor said the results beat his forecasts due to better than expected GIANT sales.

He said GIANT was the "900lb Gorilla position" in its market, with the balance sheet cash fueling a year of investment that will lift sales to MYR 99m but see a loss before tax from increased spending on R&D, marketing and general headcount, a move into the new geographies of Vietnam, Australia, China and Taiwan, together with increased hosting charges from off-premise GIANT sales.

Shore Capital's Peter McNally noted that that underlying operating margins appear to be declining, by his calculations.

He also pointed out that when adding capitalisation of development costs back in, EBITDA is MYR 16.5m resulting in margins of 21.4% rather than the 42.8% at the headline level

"While consensus estimates are likely to be upgraded and the company is showing significant growth, we think the shares are still too expensive at 25.6x EBITDA for 2016, or a PE of 34.4x," he said.

McNally added: "While we recognise this is a growing company that is still building its product, a backstop for valuation can be seen through the sales multiple which is currently 10.8x on an enterprise value basis."

Shares in Fusionex were down 35% to 215p by the close on Thursday, versus their IPO price of 150p.