Infonic

BUY

07/08/2008 Oliver Haill

Endorsed by a panoply of big-name partners and contracts, Infonic is growing fast in the information management software space, leaving its market valuation looking undeservedly low.

The Surrey-based company’s three divisions are document management, geo-replication and text analytics. Whereas its document management arm – translating paper documents into formatted electronic data – is a growing player in a crowded market, its geo-replicator and text analytics tools are world leaders.

The geo-replication technology enables organisations to efficiently synchronize huge amounts of information across all their offices worldwide. An added benefit of this software is that it specialises in dealing with Microsoft’s increasingly prevalent SharePoint programme, which helped the company win an £8.3m contract with the UK Ministry of Defence.

The text analytics software arm provides automatic analysis of news sentiment and is, as chief executive Mark Thompson confidentially claims, a ‘world leader’ in the subsector. A partnership with Thomson Reuters to create ‘sentiment analysis’ of financial news is being sold lucratively to algorithmic traders, and a new merger of this arm with a US rival has created a 70%-owned $40 million subsidiary.

After three years of acquisitions, Infonic's goals last year were consolidation and organic growth, with £8.8 million of revenues produced along with £2.1 million losses after tax and almost £2 million of exceptionals. Breakeven is forecast this year and Thompson says after a major reorganisation ‘we’re now excelling in sales’.

With £4.4 million cash in the bank at year end and valued at half the capitalisation of its own analytics subsidiary and less than half of AIM document management rival Invu, even though both produced equivalent revenues last year, Infonic looks mistreated by the market. Slated by house broker FinnCap to make 0.95p EPS from £0.5m profits this year the shares are brimming with potential.

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