The market mood over technology stories remains pretty bleak given recent controversies at global giants like Facebook, Amazon and others. But this is masking positives elsewhere, particularly among smaller companies.

We believe Eckoh (ECK:AIM) is a great example. A further deterioration in sentiment towards the tech sector is a risk but we feel the negative tide can be turned.

Full year to 31 March 2018 results sometime in late May/early June could provide the first of several catalysts for an advance in the share price.

Analysts that follow the stock reckon 60p to 65p levels are likely over the next 12 months or so, implying up to 60% upside on a best case scenario.

TRANSFORMING THE BACK OFFICE

Eckoh provides secure payment products that remove personal and payment data from contact centres and IT environments.

It also runs an automated platform aimed at customer contact solutions that enable enquiries and transactions to be performed easily and quickly from any personal device – phone, PC, tablet, smartphone etc.

This is valuable to large organisations, particularly those where customer service is one of the chief ways to win new customers and keep existing ones happy.

Think energy and broadband providers for example. Customers include a litany of corporate giants, such as Vodafone (VOD), Thames Water and Lloyds (LLOY).

It’s been serving UK clients for more than 15 years but it is expansion into the US a couple of years ago that is really driving growth. US revenues in the first half rose 36% (or nearly 60% if you strip out closed business lines and FX) to more than a third of the £14.8m total. Encouragingly, there is significant headroom to bolster gross margins in the US (58% versus 84% UK).

COMPLIANCE-FRIENDLY PAYMENTS

But perhaps most exciting is Eckoh’s fully PCI-DSS accredited secure payments solutions. This allows secure credit and debit card payments over the platform, with all the compliance, accountability and regulatory boxes ticked.

US organisations are well behind those in Europe on this, you may be surprised to learn. This makes Eckoh’s sales proposition compelling and bolsters its opportunity across the pond.

There are execution risks around the pace of US organisations embracing improved payments and contact centre support. Future acquisitions, of which we would expect some, also need careful handling. But new business has been very strong in recent months both in the US and UK.

A 31 March 2019 price to earnings multiple of 20.3 is not dirt cheap but nor is it hugely expensively given the opportunities ahead for Eckoh. (SF)

‹ Previous2018-04-12Next ›