Tungsten Corporation (TUNG) may be a newcomer - it floated in October last year - but it boasts impressive potential. That's because it used flotation proceeds to buy e-invoicing platform OB10, and as companies and governments increasingly embrace e-invoicing, growth should turn stellar.
- Major e-invoicing presence
- Impressive growth potential
- Invoice financing could prove lucrative
- Earnings forecast to soar
- Currently loss-making
- No dividends likely for years
Put simply, e-invoicing allows suppliers to bill customers through a cloud-based automated processing platform and the operator typically generates revenue from set-up fees, subscription fees and transaction fees. For customers, this saves times and cuts costs and such attractions are driving a structural shift towards e-invoicing which has seen OB10 (now called the Tungsten Network) grow fast. Indeed, at the time of Tungsten's flotation, its network hosted 122 large corporate and governmental buyer groups, servicing over 140,000 suppliers, with more than 60 per cent of FTSE100 companies using the service. Tungsten’s transaction flow volumes have nearly doubled since 2011 to over £100bn, yet it's estimated that just 3 per cent of invoices are settled electronically - suggesting plenty of growth ahead.
The customers just keep coming. Last month, for instance, Tungsten was signed by GE to roll out an e-invoicing programme into every GE operation globally. Tungsten's shares soared by a third in the 10 days following that news. While, this month, Tungsten was accredited as a supplier on the UK government's G-Cloud 5 Framework (a pan government collaborative agreement for use by UK public-sector bodies). As big-name buyers of services sign-up, the pressure mounts on the plethora of suppliers that service them to follow suit and analysts at broker Canaccord Genuity believe that Tungsten's transaction volumes will virtually double in value again by 2016 to around £198bn.
TUNGSTEN CORPORATION (TUNG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 280p | MARKET VALUE: | £280m | |
| TOUCH: | 277-280p | 12-MONTH HIGH: | 334p | LOW: 203p |
| FWD DIVIDEND YIELD: | nil | FWD PE RATIO: | 12 | |
| NET ASSET VALUE: | 177p | NET CASH: | £75.4m | |
| Year to 30 Apr | Turnover (£m) | Pre-tax profit (£m)* | Earnings per share (p)* | Dividend per share (p) |
|---|---|---|---|---|
| 2012† | 16.3 | -2.9 | ** | ** |
| 2013† | 17.9 | -3.5 | ** | ** |
| 2014* | 19.1 | -23.1 | -23.1 | nil |
| 2015* | 37.6 | 4.3 | 4.3 | nil |
| 2016* | 67.1 | 23.2 | 23.2 | nil |
| % change | +78 | +440 | +440 | - |
*Canaccord Genuity estimates, adjusted PTP and EPS figures **Prior to flotation †Figures relate to OB10, acquired in October 2013 Normal market size:2,000 Matched bargain trading Beta:1.34 | ||||
Tungsten's opportunities are global, too. Its offering is available in 45 countries and that total should grow as more nations - including such countries as Russia and India - pass or refine e-document recognition legislation. In the European Union, meanwhile, the pressure will mount to switch to e-invoicing given that the European Commission wants to make e-procurement the rule for the public sector by mid-2016. As the world's largest e-invoicing platform, in an industry where scale is a big advantage, the competitive threats look fairly limited.
Tungsten's invoice financing ambitions - specifically discounting - could prove especially lucrative. This involves lending money to small businesses against unpaid invoices and, with traditional lenders continuing to withdraw from this market, growth prospects should be significant. Neither does Tungsten lack the funding to support that business. Not only does it now have its own bank - it acquired the UK arm of First International Bank of Israel after having received regulatory approval late last month - but it's also working with Blackstone Tactical Opportunities to establish a special purpose financing vehicle with an annual funding capacity of $10bn-$12bn (£5.9bn-£7.1bn).
