Eleco reports positive momentum and confidence in FY25 outlook
The best things in life take time. It's no different for investors given the powerful effect of long-term compounding.
Indeed, I have owned shares in () since 2015, a one stop shop software developer for all things Buildtech, project management, property asset management and AI visualisation. Over this period, the stock has delivered a CAGR of >15% per annum (excluding dividends), for which I am delighted and forever grateful.
That said, this is just the start, as over the past 4 years the business has completed the heavy lifting for its successful transition from a perpetual licence to a SaaS model - delivering 75%+ recurring revenues and Net Revenue Retention rates of 109% (FY24), implying both excellent visibility and healthy client up/cross-selling. Better still, I think adjusted EBITDA margins (22% FY24) can ultimately move higher too due to economies of scale, whilst control and cash generation have always been excellent.
Today, the company said that it was trading in line with market expectations, supported by resilient demand for its best of breed products and 90% client retention rates.
Here, house broker Cavendish (target price 200p/share) is forecasting FY25 turnover, adjusted EBITDA, and EPS to rise to £39.6m, £9.1m, and 6.5p/share - climbing to £46.7m, £10.6m, and 7.9p in FY26 - potentially putting the stock on 3x-5x EV/sales, which would generate an intrinsic worth of 150p-250p/share. In comparison, larger listed peers Autodesk, Nemetschek and Bentley Systems trade on 8x-10x multiples vs 3.2x for (at 163p).
What's more, year-end net cash closed Dec'24 at £14.0m (proforma £8.9m after £5.1m Pemac acquisition in Jan'25), providing ample firepower to continue its M&A strategy.
Non-Exec Chairman Mark Castle adding: "We are pleased with Eleco's progress in the first four months of 2025, particularly given the backdrop of ongoing political and market uncertainty. Underlying demand for Eleco's products remains resilient, driven by the construction industry's continued shift toward sustainability, digitisation of the built environment, and productivity enhancements."
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