Questor share tip: WANdisco shares bounce back

Questor thinks shares in this Aim-listed technology company are worth a second look after halving in value since the start of the year.

Full-year results for 2013 reported underlying losses (adjusted Ebitda) had widened to $7.8m, from $3m in the previous year.
Full-year results for 2013 reported underlying losses (adjusted Ebitda) had widened to $7.8m, from $3m in the previous year. Credit: Photo: REUTERS

WANdisco
582½p+32½
Questor says BUY

WANDISCO [LON:WAND] yesterday announced a small deal to expand its team. So, with the shares leading a fightback during the past two weeks, we think now is the time to take a closer look.

Shares in the Aim-listed company jumped more than 6pc when it announced a $2.1m (£1.2m) deal to acquire the three-man, San Francisco-based team, of OhmData. OhmData specialises in writing computer programmes that allow companies such as Facebook to search their vast database of personal information.

The deal could be the start of a recovery in the WANdisco share price as it has been one of the major victims of the sell-off in technology companies since the beginning of March. Shares in WANdisco have fallen by more than half since the start of the year having peaked at £14 in late February before slumping to just £5.81 yesterday. It has been a dramatic fall from grace for this rapidly growing UK tech success story.

The Sheffield-based company writes computer software that helps companies search though vast amounts of data quickly and easily. With everything from a Tesco store card to social networking websites collecting information about our daily lives, WANdisco’s services are increasingly in demand.

David Richards, chief executive, said less than a month ago that the company had a “strong pipeline of potential customers” in big data with good growth from the core ALM business.

The software company continues to win customers for its big data product, with British Gas and University of California Health signing contracts during the three months ended March. WANdisco also renewed existing contracts with HP and Walmart for its ALM product.

The problem for this early stage company is that the only thing keeping it going at the moment is the issue of new shares. In the latest annual results revenue doubled but losses and cash outflow also increased sharply.

When we last looked at the shares we said they were high risk and we couldn’t recommend them at those heady prices. The correction has blown off much of the froth. Be under no illusions that, with very little cash generation, they are still risky, but worth a punt with this positive momentum. Buy.