Cape Range Limited (ASX:CAG)

June 28, 2018 | Price: $0.26

On Track to Achieve Prospectus Targets

Overview: Cape Range Limited (“Cape Range”, “the Company”) is an Australian software company focused on accounting and business intelligence services. The Company owns Biztrak Business Solutions (“Biztrak”), an Asia-focused company offering software solutions to 18,000 companies with over 37,000 users. Cape Range acquired Biztrak in June 2017 and listed on the ASX in November 2017 after raising $5.6 million. During FY2017 the Company reported a loss of $4.1 million which includes a one-off reverse acquisition cost and share-based payment expenses totalling $3.8 million.

Catalysts: Biztrak is on track to shortly provide an update on Phase 1 of its new cloud-based SaaS product Biztrack Online as per its prospectus guidance. Completion of this R&D milestone is a catalyst and puts the company in a strong position to launch the product in H2 CY18. As the Company prepares for the commercial rollout, strong uptake of the platform could deliver higher earnings margins and significantly strengthen Biztrack’s recurring revenue base. A tight capital structure and low overheads provide a favourable foundation for growth, while a strong funding position and strategic relationship with major shareholder iFREE allows the company to assess strategic opportunities.

Hurdles: The commercial success of Biztrack Online remains to be validated and there is no guarantee that forecasted synergies can be realised. Despite Biztrack’s low cash burn rate, the Company’s reliance on external capital may not entirely be eliminated as historic results were somewhat volatile. Entry barriers to the industry are limited to IP and know-how and the Company may be subject to increasing competition in an already competitive sector.

Investment View: Cape Range offers speculative exposure to demand accounting software services in Asia. The upcoming launch of Biztrack Online is a catalyst and could significantly improve the Company’s recurring revenue base and facilitate international expansion. Operational risks and competition are the primary hurdles. Cape Range is on track shortly provide an update on key prospectus targets and successful completion will allow the Company to rapidly transition towards a SaaS revenue model. Biztrack’s revenues have historically been lumpy and somewhat limited in size and scope, which the Company plans to address with Biztrack Online. Cape Range has a low cash burn rate and remains well funded to pursue strategic growth initiatives if they arise. As Cape Range achieves major milestones we initiate coverage to monitor its growth potential.

THE BULLS AND THE BEARS

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THE BULLS SAY

  • Biztrak is on track to launch its cloud-based SaaS product in H2 CY18 – Biztrack Online – and will shortly provide an update on Phase 1 of its new cloud-based SaaS
  • As the Company prepares for the commercial rollout of its cloud-based platform, strong uptake of the platform could deliver higher earnings margins and significantly strengthen Biztrack’s recurring revenue
  • A tight capital structure and low overheads provide a favourable foundation for growth
  • The Company has a strong funding position and a favourable strategic relationship with major shareholder iFREE allows the company to assess strategic
  • Cape Range offers speculative exposure to demand accounting software services in
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THE BEARS SAY

  • The commercial success of Biztrack Online remains to be validated and there is no guarantee that forecasted synergies can be
  • Despite Biztrack’s low cash burn rate, the Company’s reliance on external capital may not be entirely eliminated
  • Historic financial results were somewhat limited in scope and size
  • Entry barriers to the industry are limited to IP and know-how and the Company may be subject to increasing competition in an already highly competitive
  • An investment in Cape Range should be considered speculative in nature
Disclaimer

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its reports. As a result, investors should be aware that the S3 Consortium may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making any investment decision. The publishers of this report also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this report.

Publishers Notice

The information contained in this report is current at the finalised date. The information contained in this report is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

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