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A Broker's PreView - Will Fighting Crime Pay for Wynyard?

Overview: Technology companies in the growth phase need two things; a high demand product, and plenty of cash. Wynyard has both of these items in abundance after successfully raising $40 million in a private placement to institution’s this week. Wynyard has also offered New Zealand registered shareholders the chance to participate in a Share Purchase Plan. The $5 million set aside for “Mum & Dad” investors is unlikely to be enough to satisfy their demand for the stock.

Pros: The interest Wynyard generates on the NZX reflects the exciting space they operate in. The Company is at the forefront of crime analytics software, and is well known for taking big data sets and extracting useful user friendly information.

The challenge faced by crime fighting agencies these days is that the volume of data available is increasing exponentially, as is the speed at which this data can be transmitted. They also have to deal with data sets in a variety of forms, with varying degrees of accuracy. Taking this data and making it useful is a difficult task, and so far, no large player has managed to dominate the crime analytics market.

Wynyard announced a partnership this week giving them access to the 12,500 law enforcement agencies and departments in the US. They have been reasonably successful in getting larger customer on board, including government agencies and financial institutions.

Cons: The lumpiness and timing of some of these large contracts has been noted as reasons Wynyard missed its 2014 revenue target, reporting $26 million after forecasting $27 million in their prospectus. Wynyard is forecasting strong growth for 2015, with revenue expected to come in at $40-45 million. Hitting this target is essential to building trust with investors.

The cash burn rate is high, hence the capital raising , so investors will be hoping the company can become cash flow neutral soon. Their business model involves many up front costs to win business, but does benefit from recurring revenue over time, the plan being to spend a dollar today to make ten tomorrow.

Price performance: The Company listed at $1.15 in 2013, hit a high of $3.30 in 2014, and is traded at $1.80 after the capital raising this week.

Investment outlook: Certainly at the speculative end of the spectrum. The cash gives the company the resources to win the big contracts they covet.

 

*A Broker's View is written by Grant Davies, Investment Advisor at Hamilton Hindin Greene Limited. This article represents general information provided by Hamilton Hindin Greene, who may hold an interest in the security. It does not constitute investment advice. Disclosure documents are available by request and free of charge through www.hhg.co.nz.

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Add a comment3 Comments

Reply Alan Papesch | June 26th, 2015 at 7:01am
thanks
Reply Alan Papesch | June 26th, 2015 at 12:28pm
many years a client of yours
Reply Hamilton Hindin Greene | June 26th, 2015 at 12:48pm
Hi Alan, thanks for the positive feedback. Get in touch if you need anything.

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