WH Ireland analyst this morning discussed Defenx with DirectorsTalk “We have updated our forecasts for Defenx following (i) the 2016 interim results announced last week and (ii) the acquisition of Memopal in August. Defenx acquired 95.2% of Memopal Srl, in August, for up to €1.78m, along with €0.56m assumption of Memopal’s net debt. The combined €2.34m (maximum) consideration implied good value at 6.5x Memopal’s 2015 EBITDA and 36.1x Net Profit versus the application software peer group average which at the time traded at 14.4x EV/EBITDA and 42x Net Profit respectively. Memopal’s business has a number of similarities to Defenx, including (i) it owns its own IP (ii) it sells predominantly through channel partners and (iii) has a lean set up, with just 7 staff and 3 consultants.
Our revenue forecast for 2016E remains unchanged at €7.1m, while 2017E revenue is forecast to increase 8% YoY, benefitting from the acquisition of Memopal, with an increase in gross margin in 2016E at 81.5% (versus 78% prior). We forecast higher SG&A costs for both 2016E (+1% versus prior) and 2017E (+7%), entirely down to a higher marketing costs. As a result 2016E adj. net profit stands higher at €1.2m (+6% versus prior). Our adj. diluted EPS in 2017E is largely offset by higher share count, which forms part of the Memopal acquisition consideration, but comes in marginally ahead of prior forecasts €cents 32.5 (versus €cents 32.3 prior).”