When Alfa Financial Software (ALFA) debuted on the London Stock Exchange in May 2017, its stock was both scarce and highly sought after. Around a third of the institutions that placed orders in the initial public offering (IPO) didn’t receive any shares – and fierce competition to acquire them quickly pushed the market cap above £1bn. This excitement was tempered after the group’s first set of annual results said a weakening dollar would constrain next year’s sales growth.
- Successful move to subscription model
- High margin
- Very cash generative
- Potential buyout target
- Limited liquidity
- Premium valuation
Any residual enthusiasm was extinguished when Alfa put out a shock profit warning in June 2018 following delays to some important customer contracts. The shares currently trade on about a third of their post-IPO peak. But this isn’t a story about a frothy tech listing that failed to live up to investor expectations. In the past few years, Alfa has upgraded its customer offering and quietly established itself as a leader in a niche market. Now, with buyout interest building, it is time to reexamine its credentials.