Tecnotree has generated a lot of discussion among Finnish retail investors, so I created a dedicated thread for this.
Tecnotree är verksamt inom IT-sektorn. Bolaget är specialiserat inom utveckling av digitala kommunikationslösningar. Tjänsterna används huvudsakligen bland bolagets små- och medelstora företagskunder och innefattar exempelvis affärsanalys, marknadsföring, samt utveckling av digitala marknadsplatser. Verksamhet innehas på global nivå, med störst närvaro runtom den nordiska marknaden.
Tecnotree’s Q2 report came in below our estimate for net sales, but above for earnings. The company reiterated its guidance, but the uncertain operating environment is reflected in the company’s order flow as customers postpone their investments to some extent. In the coming years, a critical part of Tecnotree’s investment story will be how the company allocates the capital raised through convertible bonds, which it intends to allocate to M&A and product development, among other things. The risks of the stock are high, but at the current valuation the risk/reward ratio turns marginally positive in our view.
Tecnotree is a global IT solutions provider focused on serving telecom operators. The company offers its customers cloudbased BSS systems that enable them to manage their products, customers, invoicing and digitalize their business.
Tecnotree has a colorful history since the company was under significant distress from ca. 2015-2018. The company went through a restructuring phase. Eventually the company managed well in its turnaround under the current CEO Padma Ravichander and managed to turn itself to strong growth and improve its profitability.
However, the return to growth has again highlighted some structural weaknesses in the company’s business model and geographical positioning. Due to the strong commitment of working capital, the company’s cash flow has been well below the strong earnings level reported in recent years. Currently Tecnotree is trying to expand into developed countries as well to mitigate risks related to operating in developing countries. For this reason as well as due to investments to R&D the company collected 43 MEUR from debentures this year.
Additionally, it’s important to note that Tecnotree invests currently heavily in R&D and activates these costs in its balance sheet. While the depreciation levels are much lower than the R&D investments this gives somewhat too good picture of the profitability.
In the longer term, we believe the growth outlook for Tecnotree is good (although there is some cyclicality in telecom operators investments), underpinned by telecom operators’ operational model shifts and the cloud transformation of BSS solutions. Expanding into new industry verticals also offers new growth opportunities while diversifying the company’s revenue streams.
Tecnotree will publish its Q3 report on Friday at around 9.00 am EEST. We expect the company to deliver single-digit net sales growth and a clear year-on-year improvement in earnings. Of particular interest in the report is the development of the order intake, which has shown signs of softening in the early part of the year. The report also serves again as a benchmark for the development of the company’s growth investments, for which the company raised EUR 43 million in convertible bonds in the summer.
Here are the analyst’s comments about the company, when Tecnotree’s largest owner takes over convertible bonds.
Tecnotree’s largest owner, Fitzroy Investments Limited has signed a binding agreement to acquire unpaid outstanding convertible debentures of EUR 20 million subscribed by Markku Wilenius. The news was awaited, but Tecnotree will probably have to wait a long time for the final funds. At the same time, it was also announced that Markku Wilenius has announced that he will resign from the company’s Board of Directors effective immediately.
Detta företag har väckt mycket diskussion i Finland, vissa ser här många risker, medan andra ser möjligheter…
Tecnotree will publish its Q4 report on Thursday at around 9.00 am EET. We expect the company’s growth to have continued at a double-digit pace, but the result to be slightly below the comparison period. We expect the company’s accounts receivable collection in Q4 to have improved from prior quarters, in line with the company’s cash flow guidance. Our interest in the report is, of course, the outlook, with a particular focus on potential cash flow guidance, which should indicate improving cash flow as the company’s business gradually moves more towards an ARR model. In the report, we are also interested in the status of missing payments on the company’s convertible bonds.
Här är Tecnotrees Q4-resultat och nedan följer analytikernas kommentarer samt en intervju med ledningen.
Tecnotree’s revenue growth in Q4 was in line with our forecast, but EBIT clearly exceeded our forecast and the company’s own guidance range. CEO Padma Ravichander and CFO Indiresh Vivekananda gives their comments on this interview.
00:17 Highlights of Q4
05:24 Revenue at constant currency
07:37 Money collection process
09:00 Decrease in accounts receivables
09:57 Outlook for 2024: currencies staying at current levels
10:39 EBIT in 2023
11:12 Cash collection in 2024
12:11 Possible acquisition
13:35 Expansion in developed markets
14:42 R&D focus areas in 2024