Brief and confident update
The interim trading update to 31 March suggests half-year results will be in line with market expectations. The tone of the statement is particularly confident. We are not adjusting our forecasts at present, but recent newsflow regarding the number and quality of contract wins suggests our forecasts could prove conservative.
In line with (conservative) expectations
In its trading update issued on 30 April for the six months ending 31 March 2015, management expressed confidence that the results would be in line with market expectations. We do not publish interim forecasts for Fusionex (LONDON:FXIF) , but take heart from the statement. Although the commentary is limited, in addition to the expected statement about an encouraging level of sales for GIANT (Fusionex’s big data analytics product) there is a reference to “strong channels to market”.
Developing multiple routes to market is one of the key challenges Fusionex faces in achieving the market's long-term expectations, so it is particularly encouraging to see that this is perhaps driving overall growth earlier than we had anticipated.
Client win newsflow puts pressure on forecasts
The trading update follows impressive newsflow in March regarding both the quantity and quality of GIANT client wins. Firstly, an article in the New Straits Times about Fusionex, sanctioned by the company, shed a bit more light on the progress GIANT is making with reference to nine client wins since the financial year end, taking the total cumulative wins to 21 vs the 25 in our forecast for the year end and management’s own year-end target of 30. The article also contained the identities of several of the GIANT users, including Aeon (TOKYO:8267)(Japanese retailer), Yeo’s (Asian FMCG) and China Light & Power. This was followed by the announcement that the government of an Asian country, where Fusionex had not previously made a sale, had selected GIANT as part of its Smart Government Initiative, in which it will be used in an immigration and border control application.
Valuation: Market expects, market gets
As our reverse DCF analyses have shown (see our previous update notes), in the recent share price range the market is expecting a lot, albeit not the impossible, from Fusionex. Last week's statement suggests that it is delivering against those expectations.
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