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By HotStockRockets | Friday 9 February 2018
Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Recently folks have been panicked into selling shares in Falanx (FLX) as market abusers spread some clear and silly lies about the company. Falanx has answered in the best way possible with a massive contract win which, we reckon, means that it is now operating at very close to breakeven or better. And it will soon get much better than that for we shareholders.
The big news is that it has signed a new MidGARD service contract with a total revenue value of £700,000 – so that must be £233,000 a year on a margin of close to 50%, that is good business. An award-winning UK Top 20 International law firm has signed a 3-year managed service contract with Falanx to deliver advanced security monitoring of its entire global estate. Falanx has also announced a newly awarded 3-year managed Cyber Security service contract. This contract is an expansion of the existing estate of a valued client resulting in its value growing from £250,000, to generate more than £380,000 of revenues. The real gem in the statement is from Chairman Mike Read – look at what he says about the pipeline.
“I am delighted to report the continuing sales momentum of our highly regarded MidGARD service, further enhancing visibility of recurring revenues over the next three years. Our pipeline of similar opportunities continues to grow and I look forward to announcing further contracts in the near future.”
Falanx has a stated goal of reaching breakeven in the first quarter of the financial year starting on April 1 2018. This news, and a chat with the company, makes us believe that it is now at, or almost at, that inflexion point. And with such a high gross margin as that pipeline that Read mentions is converted into sales the push to very meaningful profitability is now well underway.
We forecast year to March 31 2019 (ie 7 and a bit weeks away from being current year) pre and post tax profits of closer to £1 million than £500,000. For the following year we are looking for up to £2 million. At 4.2p-4.5p the market cap is sub £7 million which is ludicrously low. On the basis of the 2020 forecasts the market cap should be – on a PE of 10 – almost three times as much. The stance is STRONG BUY with a – very conservative – target to sell of 7.75p. The shares could go much much higher.
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