Berenberg initiates coverage on Essensys at 'buy'

Berenberg said Essensys was "a market-leading provider of flexible workspace management software" that had "a very significant growth opportunity" immediately ahead of it given "mounting evidence" of a "major structural shift" towards flexible workspaces.

The German bank believes Essensys will be "a major beneficiary" of said shift and stated it already had a leading position in a £4.0bn total addressable market, something it can back up with a number of "highly significant customer relationships", building revenue momentum and longer-term margin upside.

"We believe that the 4x EV/Sales valuation is undemanding, and we initiate coverage of Essensys with a 'buy' recommendation and a 320.0p price target," said the analysts.

Berenberg also said Essensys benefits from strong revenue growth dynamics, with good metrics in terms of software-as-a-service.

"While margins will be determined in the short run by high levels of lower-gross-margin revenue and continued growth in operating costs, we believe its strong economics could result in EBITDA margins of 26% versus 5% today," said Berenberg, which stated this was currently hampered by a higher proportion of lower-margin non-recurring revenue, due to the "significant level" of site openings, but with core annual recurring revenue margins of 70%, it still sees a long-term upside.