Recommendations » UK

Globo (LON:GBO) report: Trading update: FY’09 revenues ?23.4m

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- In a FY’09 update Globo reports that revenue should be ?23.4m with operating cashflow of ?8.1m; debt was “in line with the end of 2008” (Dec’08 ?9.8m) but delays in settlement of ?5.5m of government invoices indicates a higher level of net debt (which would indicate ?9.8m, at FY’08 levels). We estimate that the public sector accounts for some 45% of Globo’s software services revenue.

- Globo noted the positive impact of funding from the 3rd European Support Framework with the ?21bn 4th Framework expected to “enable … further growth”.

- As Globo highlights, the launch of the CitronGO! mobile solution represents a “step transformation” with revenue contribution expected in 1Q’10 from the SE Asia mobile contract. It also highlights the CitronGO! MoU (Sep’09) announced in Latin America.

- Globo expects leading FY’10 to be (i) further CitronGO! deals; and (ii) 4th EU Framework funding underpinning public and private sector IT demand.

- We recently raised our target valuation for Globo, based on its CitronGO! contract with a 85m subscriber SE Asian MNO. We expect CitronGO! to remain the growth driver in 2010, building on its transformational impact in late 2009. Our “Buy” rating is reiterated.