#ELCO 

“Running one’s winners” is easy to understand, yet difficult to execute. Not least because many investors use tight ‘stop losses’ which means they automatically dump winners when others sell. Plus, even long term compounders do occasionally suffer steep falls, as happened to Nvidia yesterday (re Deepseek).

For me the trick, is to focus on secular growth & value creation, rather than temporary affects. In fact, if I believe the investment thesis remains intact, then typically I’ll hold stocks through thick & thin.

Take @Elecosoft - a one stop shop for all things BuildTech, project management, property asset management & visualisation software, which I’ve owned for a decade & added on dips.

#ELCO possesses a robust position in an expanding sector (re digitisation of construction). Alongside sporting a blue chip client base, 90%+ retention rates & 77% recurring revenues – which provides downside resilience in the face of major dislocations. 
 
Better still, #ELCO today posted record FY’24 turnover, with ARR & LFL sales rising 18% & 9% LFL respectively to £26.6m (£22.6m LY) & £32.4m (£28.0m LY). Which was bang in line with house broker Cavendish’s forecasts, & driven by client wins, up/x-selling, new products (AstraGPT & Astra Vision) and overseas expansion (US).
 
Similarly yearend net cash nudged up to £14.0m (£12.0m Jun’24 & Est £12.3m), with Cavendish expecting FY24 EBITDA & EPS to come in at £7.0m (£6.1m LY) & 4.6p (3.9p).

Sure the pace of organic growth decelerated slightly in H2’24 to circa 6% vs 12% in H1. Yet equally I suspect this might have simply been due to normalisation after a strong 1st half.
 
Going forward, Cavendish (TP 200p/share) is predicting FY25 turnover, adjusted EBITDA & EPS to rise to £39.6m, £9.1m & 6.5p/share – climbing to £46.7m, £10.6m and 7.9p in 2026. Which hypothetically putting the stock on 3x-5x EV/sales, would generate an intrinsic worth of between 150p to 250p/share. In comparison, larger listed peers Autodesk, Nemetschek & Bentley Systems trade on 9x-11x multiples, vs 2.8x for Eleco. 

CEO Jonathan Hunter commenting: " We are delighted to report continued success & improvements in trading performance, which was ahead of market consensus, while reaching several strategic milestones for the Group. We demonstrated solid growth in total and recurring revenues and delivered strong cash generation despite acquisition payments & dividend increases.”

“Strategically, we enhanced our technical capabilities, talent and scalability through the acquisition of Vertical Digital, an Eleco company and more recently strengthened our Asset Management operations with the €8.4m acquisition of PEMAC in Jan'25.” 

Finally, the Buildtech software sector is consolidating too, so don’t be surprised either, if ultimately one day, someone comes knocking at the door. Who & how much, would be anyone’s guess - albeit with 90%+ gross margins, the synergies would be material.

Disclosure: I own shares in #ELCO, who is also a @VOXmarkets client.