What’s next for high-tech removalist Updater as positive cashflow beckons
Riding the wave of a dotcom hopeful as it breaks into earnings can be highly profitable as Xero investors have seen.
The online accountant’s share price has trebled in two years as positive cash flow beckoned.
And a similar fate could be in store for Updater, the US-based online removalist service.
Its latest quarterly cash report — coupled with news of a move into another business sector — has prompted one analyst to slap a $2.40 price target on the shares (ASX:UPD).
That’s well up from the present share price of around $1.25.
Even though it continued to burn cash, Updater enjoyed surging revenue in the June quarter, with bookings hitting $US5.1 million — more than double the March quarter’s $US2.2 million.
In the June quarter revenue hit $US3.2 million, lifting June-half revenue to $US5.4 million.
The company argues the level of bookings is a more accurate guide to its fortunes than revenue since it reflects the contractual obligation of clients to pay the company.
Cash burn of $US4.8 million in the June quarter won’t turn positive quickly since it is forecasting cash outflow of $US8.4 million in the September quarter — before taking any income into account.
Even so, with $39 million of cash on hand, Updater has plenty of fuel in the tank as it pushes to lift revenue, to get it into positive cash flow.
Foster Stockbroking reckons 2019 will be the year Updater moves into the black. It is forecasting revenue to hit $58 million, resulting in a net profit of $3.7 million, giving it earnings a share of 0.5c.
Positive cashflow will be welcome news for investors since it will limit the chance of further dilution from share issues.
“We continue to recommend Updater as a ‘buy’ and now have a revised price target of $2.49,” the broker told clients in a note. Until now, the broker has not had a specific price target, telling clients the shares could be valued anywhere between $1.70 and $3.14 due to uncertainty over how its expansion plans would pan out.
“We keenly anticipate continued ramp in Business Products over coming quarters, as well as revenue growth through calendar ‘18 and beyond,” the broker said in the note.
Near term catalysts include continued high revenue growth driven by growth in market penetration, conversion rates, and transaction rates along with expanding into adjacent business areas.
“Updater ultimately aims to engage in 15-plus distinct verticals including banking, utilities, big box retail, and pharmaceuticals,” the broker noted, none of which are incorporated in its forecast.
“The ultimate valuation has the potential to be a multiple of our valuation should the company successfully add to its current five vertical portfolios.”
The broker worked on a $50 million placement by Updater a year ago, which was priced at $1.25. The broker handled an earlier raising for the company, priced at 50c.
Updater recently announced it would match users of its removal service with local service providers targeting movers via its existing platform.
Specifically, the company claims there are many business operators willing to offer discounts and other promotions to new residents to their neighbourhood, in a bid to win new customers.
Once the new service is operational, Updater said it will be expanded to act as a gateway to servicing other business sectors such as big box retail, pharmacies, hardware stores and the like.
At its core, Updater offers a single portal for organising truck rental and packing supplies for those in the US looking to move home. It has extended this basic service to include providing insurance, pay TV/internet services and the like.