THREATS TO THE VAL­U­A­TION

Finweek English Edition - - INVESTMENT - Much of the The busi­ness re­quires

fu­ture growth of the com­pany rests on its abil­ity to ac­quire other soft­ware firms. A nat­u­ral threat to its val­u­a­tion would be the cost at which these ac­qui­si­tions are con­sum­mated, as well as the as­sump­tion that there will be a suit­able num­ber of can­di­dates for the com­pany to ac­quire.

an in­ven­tory of skilled soft­ware en­gi­neers with spe­cialised in­dus­try knowl­edge in or­der to com­pete. Out­side of ac­quir­ing these skills from ac­qui­si­tions, the labour mar­ket it draws from needs to have suf­fi­cient sup­ply, at an ac­cept­able cost, for the com­pany to use. Spe­cialised skills can be­come scarce and costly. im­ple­men­ta­tion, and sup­port of spe­cialised SAP soft­ware. De­spite only be­ing in­cluded for three of the in­terim pe­ri­ods’ six months, the di­vi­sion recorded R28m in rev­enue (15% of to­tal) and op­er­at­ing profit of R7.9m (40% of to­tal). Op­er­at­ing profit mar­gin was much higher than any other di­vi­sion at 28%.

At R6.18/share, t he com­pany is trad­ing on a 22.3 times price-earn­ings ra­tio. Of course, that hardly looks ex­pen­sive when the com­pany is grow­ing earn­ings at 65% per an­num. So the fun­da­men­tal ques­tion is how long can the com­pany con­tinue de­liv­er­ing growth like this?

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