Endace

New Zealand-based network monitoring technology play Endace is well-placed to profit from proliferating cyber security threats and growing dependence on Internet-transmitted data.

The Auckland-headquartered concern, whose customers include high frequency traders such as banks as well as government agencies and telecommunications giants, provides network traffic capture equipment and according to CEO Mike Riley, prides itself on the ability to accurately capture 100% of data ‘packets’ flowing over high-speed networks. This competency is proving a compelling sell in the financial services and cyber security markets, where missing even a single packet of data can have 'catastrophic' consequences.

Interims to September showed sales broadly maintained at US$13.6m (£8.4m) in testing markets, while losses widened from $11,000 to $1.5m as the company invested heavily in beefing up its US and ‘EMEA’ region sales push. During an encouraging half, Endace, deriving almost 70% of sales from ‘The Americas’, secured ‘a good number' of competitive wins whilst its highly visible recurring revenues grew more than 28% to speak for 12.8% of the top line.

The enthusiastic Riley highlighted an ‘excellent’ pipeline of opportunities waiting in the wings and shortly after issuing the results, informed the market that an unnamed ‘leading global financial services firm’ will deploy Endace’s technology as part of a multi-million dollar project.

For March 2011 and 2012, analysts see sales surging to $35.1m and $41.8m respectively, generating ‘normalised’ pre-tax profits of $2m this year and $3m next.

Based on this year’s 10.8 cents (6.7p) earnings forecast, the shares, having sped from a 52-week low of 156.5p, now sell on a distinctly demanding p/e of 41.8.

While the rating looks pricey to say the least, it could prove a premium worth paying, given the group’s positioning in markets primed for stellar growth.