Author Topic: VOR  (Read 19 times)

galumay

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VOR
« on: October 29, 2019, 03:05:16 PM »
VOR - I have started looking at this little cloud and cybersecurity business, it has 3 main business units, cybersecurity through their Decipher Works product which is a vertical system, CLoud Ten which is a cloud service provider using Amazon's AWS product, they are an accredited partner and appear to have a strong client book in enterprise and government. Finally they have a 25% interest in an Indian ATM servicing business that they are trying to divest themselves of. It has a current audited value of around $9m

The positives are that its operating cash flow positive, and once the final tranche of payment for Cloud Ten is made, should be free cash flow positive, its extremely capital light because it doesnt own data centres because it uses AWS. Earnings are negative but this is a function of the writedown in value of the share in the ATM business, accounting rules mean that the negatively adjusted value of this asset, which is down by $5m, has to be applied to the profit and loss. In fact they made a small operational profit once the $5m is backed out.

Given that there is not much backwards looking to work from, I have inverted and considered what sort of FCF or EPS the business would need to earn to be fair value at its current price, I am calculating it would need approx 0.08c per share earnings to give a valuation in the range of its current price of 1.4c
($0.014) which would equate to $1.9m earnings.

Given current revenue growth this is not a stretch at all, in fact the operating cash flow is already at that level in 6 months, and if you back out the aquisition costs (which finish next quarter), its already reached the required earnings in FCF in 6 months.

I think its clear that with any sort of trajectory of revenue growth without increased aquisition costs, the business will prove to be cheap on current metrics, the big question is what are the threats to that trajectory of revenue growth and what is the probability?

The obvious threat to the business is another provider of similar services cutting their lunch - presumably with margin squeeze.The question is whether the current relationship with AWS provides any sort of competitive advantage.

Datacom, private, AC3 privael, ARQ.ASX, Versent, private Idea11, private Cloud Conformity, private.

This is a short list of the many AWS Advanced Consulting Partners, its the Australian ones, mostly private, ARQ being the only other listed one I could find. This is a crowded market place, and its unclear why or how VOR is growing revenue so quickly.

Another issue is the millions of options on issue, this will have a dllutive effect on what is already a high share count.

In the end I couldnt build enough conviction about the business to invest.
« Last Edit: October 30, 2019, 12:32:53 PM by galumay »