• Canaccord says Smart Parking is a buy due to its huge addressable market
  • MA Moelis also slaps buy rating on RPM Global after forecast upgrades

 

Smart Parking has a huge market and long runway – broker

Canaccord Genuity has slapped a Buy rating on Smart Parking (ASX:SPZ), with a target price of 45c (versus current price of 34c).

Smart Parking is a technology-enabled parking management provider, operating in ANZ and Europe through two core divisions: Parking Management, which makes up the bulk of its revenue, and Technology.

Its core IP (intellectual property), the SmartCloud software, leverages automatic number plate recognition (ANPR) technology to automate and integrate all aspects of parking management, including real-time parking availability and payment.

Canaccord likes SPZ for several reasons.

Firstly, SPZ operates in a large addressable market (US$4.4bn), with an industry CAGR growth of +21%. The company has a stronghold in its core UK market, with a top-five position by market share, and is in the early stages of expansion into Germany and New Zealand.

SPZ currently operates 1,112 sites and is guiding to +34% organic growth from its UK operations alone by FY25.

“The market remains broadly under-penetrated by technology solution providers (30% UK; <5% Germany; <5% New Zealand), supporting a long-tailed runway for growth, in our view,” wrote Canaccord.

The broker adds that SPZ also has a predictable and scalable business model that generates revenue predominantly through the issuance of parking breach notices (PBNs).

Canaccord believes the key to scaling SPZ’s business is growth in ANPR-operated sites, which it says could be accelerated through M&A.

“The parking management industry is highly fragmented, with a large number of small-scale operators,” noted Canaccord.

“We believe regulatory changes in the UK (SPZ’s biggest market) have the potential to put pressure on non-compliant and less efficient operators, and provide opportunities for acquisitions at attractive valuations for SPZ,” said the broker.

Currently, the UK government has proposed changes to the Parking Act to guide the operation and management of private parking facilities.

“While the outcome remains uncertain, we believe a potential outcome is to increase the discount applied for early payment (from 40% to 50%) which by our calculations would see a ~17% negative impact to revenue.

“However, we believe any such changes could see a large number of small operators become unprofitable and provide a consolidation opportunity for the scaled players,” said Canaccord.

Meanwhile, SPZ’s Technology division unlocks new revenue streams by facilitating sales of proprietary technology and hardware to external customers, and internally to the Parking Management division.

Revenue from this division is primarily sourced from selling on-street parking solutions to councils and large private enterprises, with sensors that detect the presence of cars in parking bays, ‘pay and walk’ machines, and other indicators that direct traffic to available spaces.

“Through the SmartCloud solution, the division provides real-time information to match registration with infringement rules.

“While the revenue generation is not material, the Technology division is an important competitive differentiator in winning new sites,” concluded Canaccord.

 

RPM Global could rise more after guidance upgrades

Meanwhile, MA Moelis has put a Buy recommendation on RPM Global Holdings (ASX:RUL), with a target price of $2.03 (versus current price of $1.47).

RPM is involved in software licensing, consulting, as well as technical and advisory services to the mining industry.

The broker says it was very encouraged after management upgraded RUL’s FY24 revenue guidance by $2m to a range of $107m to $112m (prior $105m-$110m), implying 11% YoY growth at midpoint.

RUL also upgraded its EBITDA guidance by $1m to a range of $18.5m to $20.5m (prior $17.5m-$19.5m) implying 30% growth YoY.

The company has recently signed another global tier-1 miner (unnamed) under a global framework agreement (GFA), which included a $6.4m, 60-month commitment for ongoing use of existing solutions, plus an incremental $2.3m in new software TCV (total contractual value).

“While upgraded guidance was largely driven by strong advisory demand, the signing of another tier-1 miner under a GFA is a further strategic deal which supports the TCV/ARR outlook into FY24,” wrote MA Moelis.

In addition to this Tier 1 miner, the FY23 result announced GFA’s with multiple Tier 1 customers (e.g. Glencore, Rio Tinto, South32) that position RUL as a preferred software vendor, significantly increasing the speed and efficiency of its sales function.

Meanwhile, RUL’s Advisory division’s order backlog has increased to $24m (vs. $18m at Jun-23). In the Q1 of FY24, strong demand for advisory services drove $16m in advisory sales.

“Across FY24, we assume EBITDA growth of ~$5m is driven by strong demand for advisory (+$3.7m) plus drop-through of incremental software sales,” said MA Moelis.

 

 

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