Join our community of smart investors

Costs weigh on Tungsten

Investment-related costs have widened the half-year loss at e-invoicing specialist Tungsten, but the long-term growth prospects remain impressive
January 14, 2015

Shares in Tungsten (TUNG) slumped 13 per cent after the e-invoicing specialist revealed that heavy investment-related costs had contributed to a wider half-year loss. Management expects this performance to be "broadly replicated" in the second half, too.

IC TIP: Buy at 238p

Yet such spending reflects the need to prepare for expansion, and growth is certainly evident. The total number of suppliers registered with Tungsten's network reached 174,000 by the end of December - an increase of 6,000 in just two months since the year-end. Prospects at Tungsten's invoice financing operation - which involves lending to small businesses against unpaid invoices - also look good after the unit agreed a funding deal last month with Insight Investment Management for "several billion pounds". Management had been in discussions with Blackstone for funding, but that involved Tungsten putting in its own capital. There's no such requirement with Insight.

Last year's acquisition of the UK arm of First International Bank of Israel should also support this business. Significantly, it gives Tungsten a banking licence, which is essential in some markets.

Broker Canaccord Genuity has downgraded its forecasts and now expects a full-year pre-tax loss of £31.2m (the broker had previously expected a £16m loss), followed by a £1m loss in 2016. Still EPS of 14.3p is anticipated for 2017, rising to 26.6p in 2018.

TUNGSTEN CORPORATION (TUNG)

ORD PRICE:238pMARKET VALUE:£246m
TOUCH:236-238p12-MONTH HIGH:410pLOW: 203p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:163p*NET CASH:£27.7m

Half-year to 31 OctTurnover (£m) Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20130.83-5.5-29nil
201410.2-14.8-14.5nil
% change+1129---

Ex-div:-

Payment:-

*Includes intangible assets of £128.5m, or 124p a share