OMG.L - Oxford Metrics

[Gregmal]

Sorry for the delay to those of you that have been asking over the past month or so. I wanted to get this in before the YE release this week. Without much further ado, here it is:

 

Oxford Metrics OMG:GB or L

 

Boilerplate company description:

Oxford Metrics plc, formerly OMG plc, is the United Kingdom-based international software company. The Company develops and markets analytics software for motion measurement and infrastructure asset management to clients in over 70 countries worldwide. The Company helps highways authorities manage and maintain their road networks, hospitals and clinicians decide therapeutic strategies and Hollywood studios create visual effects. The Company operates through Vicon subsidiary. Vicon is engaged in motion measurement analysis. The Company provides software for the government, life sciences, entertainment and engineering sectors.

 

Oxford Metrics Group consists of two main businesses;

 

The Group comprises the following business segments:

Vicon Group: This is the development, production and sale of computer software and equipment for the engineering, entertainment and life science markets; and

Yotta Group: This is the provision of software and services for the management of infrastructure assets and highways surveying services (which were sold during the prior year) for the Government Agencies, Local Government and major infrastructure contractors.

 

-Market leader in motion capture technology, involved in everything from IoT infrastructure, video games, health and wellness, hospital management, virtual reality, data analytics, Hollywood movies, etc. Huge potential growth runway for software and data management biz for the foreseeable future, ie minimum of 5-10 year runway.

 

Introductory videos on company page are perhaps useful

 

https://oxfordmetrics.com/about

 

-Developed Yotta, SaaS applications and captured major government projects and will likely grow recurring revenue at a double digit clip for the foreseeable future

 

-Very well managed and operate utilizing highly focused 5 year plans. Fortress of a balance sheet. Been paying dividends for years. Highly diverse customer/revenue base.

 

-Been growing organically and through combination of conservative bolt on acquisitions. Build up, and then sale of 2d3 division to Boeing in 2015 highlight value creation and management strength.  Management is well aligned; Nick Bolton owns nearly 2% of the company’s shares outstanding and has been associated with the company since 1995. CFO David Deacon additionally holds about 1%. Like Bolton, Deacon spent time at Mediasurface, another London listed software company that was developed and then eventually sold. Executive compensation is very reasonable as well.

 

-Covid has effectively created a one off hiccup/disruption that both highlights the usefulness of these services to end users, while also allowing investors to get in at a reasonable valuation, currently ~20x NTM projected numbers or a bit over 3x sales. 

 

 

Some excerpts highlighting this growth opportunity from the AR:

 

“2018/19 saw some great wins at leading sports teams and institutions, including Texas Tech University, Exponent, UNC Chapel Hill, Airforce Academy, Stephen F. Austin University, University of Kentucky, University of Memphis and the University of Tennessee Knoxville. Further we have recently been awarded a patent in the US for our unique approach to load management. “

“There were also good wins in the Life Sciences market with a number of long-term Vicon customers all upgrading. This included Robert Gordon University, Staffordshire University and the Human Performance Lab at Imperial College London, and also The Shriners Group of Hospitals upgraded several sites in the US. There were also new site wins including an exceptional order from a major sports apparel business, The University of West Scotland and Vilnius University Children’s Hospital.”

“The Engineering market segment performed well throughout the year, the customer list included new contracts with European Space Agency, Thales Alenia Space, Northrup Grumman and NASA’s Jet Propulsion Lab.”

“Our most notable international win was in New Zealand at Auckland System Management (ASM), a joint venture between the New Zealand Transport Authority (NZTA), Fulton Hogan and HEB Construction, a Vinci company. ASM is now using Yotta’s innovative software, Alloy, as a single platform to manage all their Intelligent Transport System assets which are used on the motorways in and around Auckland, connecting multiple stakeholders and enabling them to bridge operational silos across the organisation. It will also allow them to deploy sensor technology into the network feeding real-time data into Alloy, so ASM can improve service levels and offer live reporting of issues and resolutions to customers.”

“During FY19 Yotta established a Major Accounts function that is targeted on developing the relationships with large, multi-national contractors and central government agencies. Yotta has long standing relationships with many such organisations, including Balfour Beatty, Amey, Fulton Hogan, Welsh Government and Highways England. Working with such organisations enables us to sell into larger, integrated opportunities, where software is only a component of the solution required.”

 

 

I do not currently have a hard price target as anyone trying to do so in this space is kinda full of it. In Saas you see analysts behaving like its 1999 and many PMs drawing up rather unconventional ways to justify some of their investments.  What I do know is that this company is extremely well positioned for the future growth opportunities, in the highest growth areas, and currently sports a very reasonable valuation and more comforting as a shareholder, an enviable track record and highly capable management team. This opportunity, is essentially a pure play on many of the major technological advances/themes that have been in place prior to covid, but were put on steroids by the virus and following developments. Additionally, this is, to my knowledge, totally off the radar and has never been written up anywhere before. There is no analyst coverage either, and many investment sites and brokerage houses have zero mention of this company’s existence even if one looks for it. This opportunity is further accentuated due to the nature of semi annual UK reporting(whereas most business delivered the kitchen sink results in Q2/3) and the timeframe with which covid related issues started impacting the world. As such, it is my belief that muted results that impact headline numbers will largely be a thing of the past starting with the 2021 year for Oxford and with Yotta delivering a profitable H2, retaining nearly 95% of customers, and growing Saas revenue at a double digit clip, Oxford will have major tailwinds from here on out.

 

The perceived negatives are my positives…stock only trades $50k-$100K a day on most occasions. Shares not accessible through many US brokerages including IB. Lack of quarterly reports. UK/EU trading hours. All make the company an orphan and none effect my fundamental case, in fact that justify it and enhance the opportunity.

 

Disclosure: long OMG.L. I reserve the right to transact in this security. I have every intention to continue buying at the current valuation or lower and no intention to sell anytime soon. My stuff should not be believed on its own. Assume everything you read on the internet is wrong. Do your own due diligence.

 

[Gregmal]

https://oxfordmetrics.com/news/2020-12-03/preliminary-results-for-the-financial-year-ended-30-september-2020

 

Declared 1.8 dividend. US still muted, not surprising given the business segments. Rest of the world doing fine and have developed a solid backlog at Vicon to springload 2021. Yotta expected to be fully profitable next year, a first. Also expecting at least 15% growth in recurring revenue at Yotta.