Growing, cheap and neglected.
WSE:BCM
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BETACOM SA
WSE:BCM
Current Price: 5,25 pln
Market Cap: 21.210.000 pln
Share #: 4.040.000
Investment Highlights
Solid growth with the last three profitable quarters, indicating strong business momentum
Compelling valuation with a potential of decent dividend
Favorable capital structure with high insider ownership
Business Model
Betacom operates a services-focused business model, providing a wide range of IT solutions to help clients digitally transform. The core of its business model involves delivering ongoing managed services, integration projects, consulting, and maintenance support across four key business lines:
Hybrid IT
The Hybrid IT business line focuses on supporting clients' infrastructure and operations. Services include cloud integration, data center modernization, IT outsourcing, automation, and cybersecurity. Betacom helps clients optimize infrastructure costs, enhance security, and enable digital initiatives. The company utilizes its expertise with technologies from major partners like Microsoft, AWS, Cisco, and VMware. Betacom consultants design solutions tailored to each client's environment and business objectives, often spanning on-premises, private cloud, and public cloud platforms.
Logistics
The Logistics business line centers around Betacom's transportation and warehouse management software solutions for clients in transportation, logistics, manufacturing, and retail verticals. The main product offered is VIA TMS, a proprietary transportation management system (TMS) built by the acquired company Control System Software. VIA TMS provides multimodal shipment planning, execution, and freight accounting across road, ocean, air, and rail transport. It helps streamline operations for freight forwarders, carriers, brokers, and shippers managing in-house transportation. Betacom sells VIA licenses, implements the software, and provides ongoing product support.
Education
Leveraging its eduwarebox platform, Betacom delivers specialized e-learning solutions for educational institutions and publishers. The company enables clients to efficiently create, manage, and distribute digital learning content. Specific solutions help schools and universities transition textbooks and curriculum to online formats, facilitate collaboration between teachers and students, and analyze learning data.
Smart Workplace
The Smart Workplace line focuses on tools and platforms to digitize document and process workflows inside organizations. Betacom helps clients implement electronic document management, content management, enterprise search, workflow automation, and data capture through technologies from partners like SER Group, UiPath, and Microsoft. It works across paper-intensive functions like finance, HR, legal, procurement, sales, and customer service to drive efficiency and compliance gains. Expert consultants design solutions integrating multiple applications then provide support services.
Customers
Betacom serves a diversified customer base across industries like telecom, finance, retail, manufacturing, transportation, education and government sectors. The company counts some major Polish and European firms among its clients but also numerous mid-size companies. Most of the current revenues are derived from the Polish market. As Betacom invests in sales and marketing capabilities abroad, it aims to derive over 15% of revenues from non-Polish markets within the next three years. Key target geographies include Germany, Austria, Switzerland, the Nordics, and Benelux region.
Within financial services, the company supports leading Polish banks, insurance firms, and fintech disruptors on initiatives ranging from core banking modernization to robotic process automation of back-office functions. Betacom also serves clients across lending, payments, wealth management, and compliance verticals.
Additionally, Betacom partners with prominent retailers and consumer goods producers to implement supply chain management software, point-of-sale and ecommerce platforms, as well as analytics modules leveraging artificial intelligence.
Company focuses on ERP integration, manufacturing execution systems, industrial internet of things (IIoT), and smart factory solutions tailored for automotive, machinery, electronics, and other fabrication firms. For transportation and third-party logistics providers, Betacom's proprietary VIA TMS software interlinks critical shipment planning, execution, and accounting processes across suppliers' road, ocean, air, and rail transport activities.
SWOT
Recent News from the company
In June 2022, Betacom acquired a 51% stake in logistics software developer Control System Software. This expands Betacom's solutions for the TSL (transport-logistics) industry.
The company is investing in R&D to enhance its logistics and warehouse management platform. It received two grants from the National Centre for Research and Development totalling PLN 15 million.
In September 2022, Betacom's CEO transitioned from a long-serving founder to a new executive, indicating a shift to professional management.
The company aims to increase the share of international revenues, which are currently less than 1% of the total. It is exploring partnerships to expand in markets like DACH (Germany, Austria and Switzerland).
Revenue Growth Catalysts
RPA
Robotic process automation (RPA) is seeing high demand as companies accelerate digital transformation. Betacom is investing in RPA competencies and has partnerships with leading vendors like UiPath. There is room for expanded RPA sales into new sectors.
Key benefits of implementing RPA solutions in a business:
Cost Savings: reducing operational costs by 25-50% by automating tasks done by human employees.
Improved Efficiency: Boosting capacity and productivity, work 24/7 without breaks, performing far more work than human employees.
Higher Security: Granular access controls in RPA systems prevent data leaks and breaches. Encryption further secures data.
The global RPA market was valued at 3758.53 MUSD in 2022 and is expected to grow substantially, reaching a value of 13871.72 MUSDby the year 2028. The estimated CAGR for the Robotic Process Automation (RPA) market during the period from 2022 to 2028 is 24.31%.
TMS (Transport Management System)
EU regulations, such as the Mobility Package, bring forth new rules for the road transport sector, aiming to balance driver social protection with operator freedom in cross-border services. In the EU's strategy for sustainable mobility, including a 90% emission reduction by 2050, digitization and automation are vital. The European Mobility Data Space (EMDS) introduction aims to ease data access, collection, and sharing from various transport sources, influencing Transport Management Systems (TMS) development.
Betacom offers the VIA TMS platform focused on the fast-growing TSL (transport-logistics) industry. As mentioned in recent news, BCM acquired (The goal is fully ownership) Control System Software - a company that developed those services.
40% of Polish transport companies plan to invest in digitization and technology. This is one of the top 3 trends in the industry.
Transport companies plan to implement TMS to meet changing industry needs. This aligns with the global trend of 13% growth in the TMS market expected by 2030.
Polish companies spend a smaller percentage on IT services compared to other EU countries.
Control System Software has experienced a significant surge in demand recently. Let's look at their growth. Extrapolating the growth trajectory, we could anticipate that these services may soon constitute a double-digit portion of Betacom's revenue.
Furthermore, looking at the revenue dynamics of one of the leading TMS providers in Poland, Inelo, it is clear that the demand for TMS in Poland is very high.
An additional trigger and source of revenue for Betacom could be a new EU Fisheries Control Rules:
On January 9th, 2024, new rules for a reinforced EU fisheries control system entered into force.
The revised rules modernize monitoring and control of fishing activities to make EU fishing more sustainable.
Data Security and Protection
This is a hot topic now. Betacom has solutions for:
Data management in the organization
Data transfer security
Communication and data sharing security
Public cloud security
Betacom is a Fortinet partner - a cybersecurity company offering solutions like firewalls, VPNs, and intrusion prevention systems. Betacom won Fortinet's 2019 award for the "most interesting cloud project" that used Fortinet solutions to enable secure VPN connections. This strategic partnership enables Betacom to tap into Fortinet's industry-leading security portfolio to better serve customers and expand their offerings around digital transformation and cloud security.
EDM (electronic document management)
Poland has been developing the KSeF platform to enable mandatory B2B e-invoicing. Initially scheduled to launch in July 2024, it has now been postponed due to technical issues, with a new timeline yet to be announced. KSeF will require companies to issue structured XML invoices that get validated and stored by the government system. It aims to increase VAT control and cash flow for businesses by shortening refund times.
EDM systems and e-invoicing solutions play an important role in enabling businesses to exchange and manage e-invoices in compliance with KSeF and other regulations in Poland
EDM systems can be used by companies to:
Receive, store and manage e-invoices
Integrate e-invoices with accounting/ERP systems
Archive invoices and ensure compliance with document retention regulations
Automate workflows for processing invoices
Research & Development
Autonomiczny Spedytor
Control System Software is carrying out a research project called Autonomiczny Spedytor, funded by the National Centre for Research and Development (NCBiR). The aim of the project is to develop software to support the work of freight forwarders and dispatchers in road transport. The new product with AI algorithms will assist in making operational decisions including accepting orders, contract scoring, route planning, and vehicle scheduling.
“Optimization of large-scale intralogistic processes and fleet structure and distribution process of Jeronimo Martins Polska S.A. by applying multi-criteria distribution planning algorithms using sensory, identification and location data”
The project is being implemented by a consortium consisting of Betacom SA, Łukasiewicz Research Network – Poznań Institute of Technology, and Jeronimo Martins Polska S.A. Betacom SA is the leader:
The goal was to develop advanced technological and algorithmic solutions to modernize and optimize JMP's distribution and large-scale intralogistics processes across its extended logistics network.
The solutions will enable dynamic optimization of JMP's logistics processes based on real-time data about various logistics resources - employees, warehouse infrastructure, transport vehicles, logistics units, etc.
The project was successfully completed in October 2023. As summarized by a representative of Biedronka Polska:
"We are able to precisely measure the temperature, we will know exactly when the container was opened and whether it is empty or full. All of this translates directly into personnel management and benefits for customers, such as even fresher goods. In the distribution center itself, this will allow for better management of container resources. By collecting these parameters, we are able to measure efficiency even more effectively and improve it through the use of advanced algorithms."
Financials & Valuation
Revenue & Earnings - Q3-23 (Dec-23)
- Betacom reported revenue of PLN 146.1 million for the 9 months ended Dec 31, 2023, a 23.7% increase over the PLN 118.2 million in the same period last year.
- Operating profit was PLN 2.9 million, compared to an operating loss of PLN 0.6 million last year. The swing to profitability was driven by strong revenue growth and improved cost control.
- Net profit was PLN 1.9 million, versus a net loss of PLN 0.9 million last year.
Valuation Multiples
Betacom appears to be trading at relatively low valuations compared to its revenue, earnings, cash flows, balance sheet and growth prospects. The company delivered three consecutive quarters of profitability.
PE 11,17x
PS 0,12x
BVPS 1,07
We can see a significant increase in Revenue/Share and Earnings/Share:
At the end of December, the company had 14.04 mpln in cash. After deducting interest-bearing debt, this would imply a valuation of 3,08 PLN per share. Considering today's market capitalization, cash alone constitutes almost 60% of the company’s value!
Is it cheap enough?
Management & Shareholders
The largest shareholders of the company hold over 60% of the shares, suggesting that increasing the company's value is in their best interest. In recent years, BCM’s offer has undergone significant transformation. From an integrator specializing in delivering and implementing IT infrastructure, they have become a provider that helps clients develop their business through technology. Then, changes in shareholders structure could be observed. Some key employees bought shares on the open market, including the company's CFO. Antonio Zaragoza joined the shareholder base. Both the management team and the board include individuals with extensive experience in the IT industry and the world of finance. Last year, the company underwent a stock split, which can be advantageous for shareholders as it enhances the liquidity and demand for the stock. This has the potential to gradually increase share prices over time.
Conclusion
Betacom is trading at low valuations despite strong financial performance and future opportunities. The share structure is tight, there is no analytical coverage. Twitter is silent.
I like the setup.
Thanks for the great analysis. There are a lot of publicly traded IT services companies in Poland. What do you think makes Betacom unique?