Defenx PLC (DFX.L) provides security solutions with a range of products for mobile devices and personal computers (PCs), protecting them against hackers and data loss. The Company offers Defenx Mobile Security Suite for iPhone operating system (iOS) and enterprise network attached storage (NAS) antivirus software. It operates through three segments: Mobile, PC and NAS. The Company’s product, Defenx Mobile Security Suite offers protection from data loss, viruses and other malware intrusion, phishing and other attack. The Company’s product, Defenx Security Suite and Defenx Antivirus offers PC protection from data loss and hacker exploits. The NAS Antivirus, sold as Seagate Antivirus, provides antivirus protection with daily updates, e-mail updates and event driven notification. Its product, Defenx Cloud Backup provides backup, synchronization and sharing of data, such as documents, music, video and pictures on Windows, Apple and Linux PCs, as well as Android, iOS and Windows 10 devices.
On January 24 2017, DFX published a trading update and said it expected FY revenues of €7.3m, representing 57% year-on-year organic growth. The group’s first acquisition of cloud backup and synchronisation business Memopal Srl had been successfully completed, along with a €1.5m placing to support accelerated investment in new software. CEO Andrea Stecconi said second half revenues “had brought the full year into profitability, resulting in an increase in full year operating margins as compared with 2015.” The board are “confident that the Group will show continued growth in revenue and profit over the coming year in the ever-exciting mobile security software market.”
Despite the placing in late 2016, VectorVest metrics flagged up the material undervaluation of DFX when the shares traded below 70p in early November. Shares have since recovered to 111p, but despite this, the VST-Vector (VST) master indicator for ranking every stock in the VectorVest database logs a VST rating of 1.30 for DFX, which is very good on a scale of 0.00 to 2.00. The VST is computed from the square root of a weighted sum of the squares of Relative Value (RV), Relative Safety (RS), and Relative Timing (RT). Cautious investors should note that the RS rating is below par at present, but still retains a high VST ratings and is a stock to own for above average, long-term capital appreciation. Added to this, VectorVest logs a current value of 139.78p for DFX, meaning that the stock is still undervalued.
The chart of DFX.L is shown above. The green line study above the price is the VectorVest valuation while in the window below the price the volume of shares traded is plotted.
After the selloff into the US election low in November the share has made a rising bottom which is bullish. Since the low in November the share has made two high momentum moves upwards. These moves were characterised by a surge in volume as shown above. At present the share is trading sideways on very low volume which indicates that there are few sellers around. Any market rising on high volume and pulling back (or in this case consolidating) on low volume represents a very bullish environment. Technically the share looks highly probable to advance further soon.
In its current growth phase, an investment in DFX shares does not come without risk. On balance however, VectorVest believes the combination of positive metrics, the confidence expressed by the board and the valuation gap combine to create an enticing growth investment opportunity. Buy.
Dr David Paul
February 16th 2017
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