LONDON (ShareCast) - (Sharecast News) - Analysts at Berenberg initiated coverage on software and IT services firm Essensys at 'buy' on Thursday, stating the group had plenty of "space to grow".
Berenberg said Essensys was "a market-leading provider of flexible workspace management software" that had "a very significant growth opportunity" immediately ahead of it given "mounting evidence" of a "major structural shift" towards flexible workspaces.

The German bank believes Essensys will be "a major beneficiary" of said shift and stated it already had a leading position in a £4.0bn total addressable market, something it can back up with a number of "highly significant customer relationships", building revenue momentum and longer-term margin upside.

"We believe that the 4x EV/Sales valuation is undemanding, and we initiate coverage of Essensys with a 'buy' recommendation and a 320.0p price target," said the analysts.

Berenberg also said Essensys benefits from strong revenue growth dynamics, with good metrics in terms of software-as-a-service.

"While margins will be determined in the short run by high levels of lower-gross-margin revenue and continued growth in operating costs, we believe its strong economics could result in EBITDA margins of 26% versus 5% today," said Berenberg, which stated this was currently hampered by a higher proportion of lower-margin non-recurring revenue, due to the "significant level" of site openings, but with core annual recurring revenue margins of 70%, it still sees a long-term upside.

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