It is always good to enjoy a quick return on an investment, particularly when it is one that is intended as a long term play.
Such has been the case for me over the last month with 1Spatial (SPA), which I have covered here twice already this year and where the shares have risen more than 60% from the 31p at the time of my piece last month, to a current 51p.
As a result of that marked increase, I decided to top slice yesterday and take some profit off the table. That provides me with a bit more to add elsewhere, whilst keeping me invested in SPA for the longer term where I believe the prospects remain very positive.
In terms of another purchase, I have been keeping a close eye on Sys Group where I already hold from a lower entry point, but where the shares continue to look cheap.
I last covered the company here in December on the back of speaking with the CEO Adam Binks and the shares were then trading around 36p.
Since then, they subsequently moved northwards to around 44p, although in more recent weeks the shares have been more or less static after easing back to 40.5p.
As a reminder, Sys is a managed IT services and cloud hosting provider where, with an extensive and wide ranging customer base it has a few big hitting customers on board such as AXA.
Unlike some AIM companies who regularly trot out news that can often appear largely questionable, Sys by contrast doesn’t release much at all, save for a trading update, the results or notice of an acquisition.
That can actually be quite refreshing and when I spoke with the CEO it was apparent that the strategy is to concentrate on driving the business forward and let the numbers do the talking.
Not surprisingly, Sys had - like others - to adapt with the onset of the pandemic and initially there was some disruption leading to the early withdrawal of forecasts which was in keeping with many other companies.
The forecast for full year 2021 was however subsequently reinstalled by broker Shore Capital back in November and Binks told me at the time we spoke that he was comfortable with the numbers pencilled in.
There has been no news from the company since then, but there will be a pre-close trading update later next month I have been told and should provide for a timely update.
I should be speaking with Adam Binks again on or around that day and will pen something further, which could also possibly see some projections from the broker on future forecasts for 2022.
For now, looking at its Twitter feed which is always worth a peek, it appears there has been plenty going on at the company, including the hiring of more heads which is usually a positive signal.
Indeed, with the onset of Covid and the transition to home working and ever more internet traffic, IT services and the security element that comes with that have seen and should continue to see high levels of activity and arguably increased demand.
Looking at others across the sector, Sys currently looks very good value with a market cap of just £20m, net cash and where it should deliver EBITDA of £2.8m and adjusted pre-tax profits of £2m with EPS of 3.3p.
There is no reason to suggest that those full year 2021 numbers will not be met, not least, as the CEO sounded confident enough with the broker taking a cue and putting out numbers.
Taking the view that the figures in the Shore note will be delivered, then Sys currently trades on a PER of only 12, which is at a considerable discount to the sector average and peers.
On reintroducing the full year forecast, Shore commented that they expect expect cash conversion to remain strong at circa 95% of adjusted EBITDA in Full Year 21, which is higher than the normalised level of circa 85%, supported by the strong H1 performance, giving rise to pre-exceptional operating cashflow of £2.7m (FY20: £2.4m).
Looking ahead, the key for a potential upgrade and shining a light on the future prospects at Sys will be a positive forward picture for 2022 and beyond, which could also see further bolt-on acquisitions being made.
Nothing is ever certain in this investing business of course and things can always take a nasty turn, but at this level and with current guidance looking comfortably achievable, I have been happy to add to my position here.
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