Small Caps | Sep 08 2022
This story features SYMBIO HOLDINGS LIMITED. For more info SHARE ANALYSIS: SYM
Although generating an adverse market reaction with its high expenditure guidance, analysts largely agree that overseas expansion will support Symbio’s growth longer-term.
-A largely in-line full year result, but high investment cost guidance disappoints the market
-Ongoing expenditure on Asian platforms likely to weigh on earnings growth short-term
-Expansion into Singapore and Malaysia could pave the way to penetration in additional regions
By Danielle Austin
While the market did not respond well to Symbio’s ((SYM)) full year results, analysts see potential in the company’s long game if the service provider remains focused on overseas growth and staff retention.
Describing itself as a complete solution for launching, scaling and managing cloud communication, Symbio offers customers scaleable data and cloud communication, and communication enablement solutions. Symbio customers access customised solutions for unified communications ((UCaaS)) and communications platforms ((CPaaS)).
Having spent $7.6m in operational expenditure investment in the last year on its Asian expansion, ramping up its Singaporean and Malaysian platforms remains a key focus for Symbio in the coming year. With its Singapore platform successfully launched, the company has guided to a further $7m investment spend to support additional growth and launch in Malaysia.
Symbio has already onboarded 17 communications platform-as-a-service (PaaS) customers in Singapore, and remains in talks with a further 13. Although the region did not reach breakeven, it is expected to make a positive contribution to financials in the coming year. The company is targeting 100,000 numbers from its Singapore operations in FY23. Symbio’s organic entry strategy into Malaysia also remains on track, with launch anticipated in the coming year.
Growth in Symbio’s communications PaaS did moderate in the second half of the year, but the company guides to one million new numbers on the network in the coming year. Analysts noted large customers were working through existing inventory in the second half, creating the drag on growth. Symbio guides to earnings growth of 0-10% to $36-39m in FY23, underpinned by 20% recurring gross profit growth.
Singapore and Malaysia could be the link to further overseas opportunity
The only FNArena database broker to cover Symbio, Morgan Stanley, updated on the company with an Overweight rating and a target price of $4.80. The Morgan Stanley analysts highlighted stronger exit run-rates across its services, noting new CPaaS wins in the fourth quarter suggest acceleration into the new year. Morgan Stanley notes Symbio remains in an investment phase, but the broker’s outlook reflects a long growth runway and strong underlying growth.
Also updating on the company was non-database broker Moelis (Hold, target $4.23), which anticipates a successful launch in Singapore and Malaysia could provide a pathway for Symbio into more population dense regions, such as Vietnam, South Korea, Japan and Taiwan. The broker estimates Symbio can reach 0.5m numbers in Singapore by FY25, and that each number will contribute $4 to earnings. Given company guidance for increased investments, Moelis lowered its earnings for FY23 to $36m.
Cannaccord Genuity (Buy, target $5.30) felt the market reaction to Symbio’s full year results may have been overdone, expecting the company’s commitment to investment may have been considered a negative. The broker notes net cash of $43m was lower than estimated over the year, but highlights coupled with unused debt facilities totalling $60m leaves Symbio with more than $100m in funding to act on acquisition opportunities. Given its net cash position and cash flow positive outlook, the broker finds Symbio well placed.
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