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Falanx – results delay a cause for concern? We think not, still a strong buy

By HotStockRockets | Thursday 12 July 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.

Falanx (FLX) has announced results for its year ended 31st March 2018 will be on 14th August this year. That compares to 10th July last year. So a cause for concern? We think not…

The company notes this “due to strong management focus and prioritisation on the successful integration of the recent acquisition, First Base” – and reinforces optimism in adding “we look forward to updating shareholders on our progress”.

Cyber security testing and consulting business, First Base was acquired in March – it having reported EBITDA of £0.6 million on revenue of £1.8 million for its year ended 31st March 2017 and noted to have “over recent periods… achieved annual revenue growth in excess of the wider industry growth rate”. It was added “the board of Falanx believes that there are many synergies and cross selling opportunities between the current Falanx Cyber division and First Base”.

Therefore, a strong focus on this is understandable and sensible. Additionally, previously hearing from Falanx in May it was of new contract wins worth approximately £0.9 million of new revenue and impending release of its next generation of cyber security technology. That update saw us noting that forecasts for the now current year look solid – we looking for a pre-tax profit of £1.3 million+, with the potential to rise to £3 million+ next year.

It is in the context of progress towards these, more than the now quite historic numbers, that we look to the upcoming results – and this with, at a current 4.3p share price, the market cap £11.2 million. A stock growing such in a sector such as cyber security should command a mid-teens+ price/earnings rating – and thus at up to 6p, currently our stance remains strong buy.

This article first appeared on HotStockRockets - to catch the next red hot share tip from the HotStockRockets team for just £5 click HERE

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