Overview: Bulletproof Group Ltd (“Bulletproof”, “the Company”) is an Australian software company providing end-to-end and managed cloud services to business and government customers. Customers are billed upfront for consulting and implementation and then charged on an ongoing basis for hosting and management. Bulletproof listed on the ASX in January 2014 via a reverse takeover of Spencer Resources Limited.
Catalysts: Since the reverse takeover, Bulletproof has recorded accelerating revenue. During FY15 Revenue has increased 59%, while operating cash flow has improved 53% y-o-y. Approximately 75% of its revenue is of recurring nature providing somewhat income stability. The $3.5m acquisition of Infoplex Pty Ltd is expected to be FY16 earnings accretive and generate in excess of $2m EBITDA annually. Management has a favourable track record in the internet and software industry and is major shareholders in the Company.
Hurdles: Bulletproof’s acquisition strategy creates integration and funding risks. There is no guarantee that new businesses will generate sufficient earnings to justify the investment. Additional capital raisings and further dilution of shareholders are the primary risks.
Investment View: Bulletproof provides profitable exposure to the managed cloud service industry. Integration of acquisitions and further capital raisings are the primary risks. However, accelerating revenue and earnings are near-term drivers. With management’s proven track record in the industry, we initiate coverage with a ‘buy’ recommendation.
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