Berenberg backs Accesso's increased R&D investment
Berenberg on Friday reiterated a 'buy' rating for shares of Accesso Technology Group, with analysts arguing that the company's plans for increased investment in research and development is the "right approach", despite the resulting hit to its estimates for profits and cash flows.
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The note from the broker said increased R&D investment "will allow Accesso to more effectively penetrate its more than 1,100-strong client base with multiple products and accelerate new client deployment," despite the downside of lower full-year EBITDA estimates until 2021.
Two days before the company had raised its guidance for R&D spend in 2019 by about 30% or approximately $8.0m, leading Berenberg to axe its estimates for the company's EBITDA by about 24% for fiscal years 2019 to 2021.
Analysts were also clearly impressed as the ticketing division, which is responsible for 66% of sales, enjoyed 18% organic revenue growth following the Merlin contract rollout, new customer installs and continued shift to digital ticketing.
"Ingresso (acquired in March 2018) performed well also, delivering 11% pro-forma growth in FY 2018 despite its largest client, Amazon, exiting the ticketing market in Q1 2018. With relationships with Google, Groupon, Ticketmaster and YPlan already in place, Ingresso’s outlook is bright," said the note.
But analysts also slashed their target price for the stock from 3,000p to 1,400p as Queuing revenue growth remained "subdued" and TE2, acquired for $80m in July 2017, put in a "poor" performance as pro-forma revenues dropped by 30%.
"That said, it was well known when acquired that TE2 is an early-stage business with high customer concentration and lumpy professional service revenues. TE2’s guest management technology remains interesting, extending both the capability and opportunities for accesso’s platform, as shown by recent client wins for combined deployment of TE2 along with its other products," the note added.
Overall, the analysts remained positive on Accesso's progress, lauding the company for its increased R&D spend, which management said should allow for modular installation that will allow operators to build their platforms over time and the ability to integrate with internal and third-party solutions.
Accesso Technology Group's shares were up 0.73% at 830.00p at 1159 GMT.