CyanConnode – a £70m mega-order could really spur this group’s shares, now 13p, with brokers 26p DCF valuation

14.04.2025

Having initiated my coverage of this £45m-capitalised company way back in mid-September last year, when its shares were just 8.8p, I now understand why they could be worth three times that price.

£70m Letter Of Intent

This morning CyanConnode (LON:CYAN) has announced that it has been issued a Letter of Intent for a total contract worth approximately £70m from the Government of Goa's Electricity Department to deploy approximately 750,000 smart meters.

As Panmure Liberum analyst Harvey Robinson stated in his note today on the group:

“This is the first major win for DigiSmart and validates this additional route to market for CyanConnode.

To date, they have won over 14m unit orders, and the backlog, including this contract win, is now £180m (£110m excluding this contract).

CyanConnode has built a meaningful share in the Indian smart metering market with a strong, locally-led Indian team.

This is a significant 250m unit market opportunity.”

The Business

Established in 2002 and listed on AIM three years later, the group is a world leader in the design and development of Narrowband RF mesh networks that enable Omni Internet of Things (IoT) communications.

With its wealth of expertise and experience in smart technology, it provides its customers with long-range, low-power, end-to-end networking solutions and high-performance applications that help them enhance service delivery, improve business efficiency and save energy.

Its industry-leading solutions and apps enable governments, metropolitan authorities and businesses to monitor and manage services, such as smart meters for utilities and street lighting.

The group’s award-winning Omnimesh Advanced Metering Infrastructure platform has already gained considerable commercial traction, especially in India, which is now a key market for the company.

Through a global partner eco-system, which is vendor agnostic, CyanConnode has several routes to market, positioning it to capitalise upon increasing global demand for smart metering solutions.

Management Comment

Chairman John Cronin stated that:

"Securing our first major AMISP (Advanced Metering Infrastructure Service Provider) contract represents a pivotal achievement, and this landmark £70m Goa smart metering LOI marks a significant milestone for the Company.

The contract validates our strategy, firmly establishes our credentials as an AMISP, and substantially enhances our ability to secure further tenders.

This success is set to deliver a step change, accelerating CyanConnode's future revenue growth and profitability."

The Equity

There are some 358.89m shares in issue.

The larger holders include Axia Investments (13.01%), Premier Fund Managers (9.53%), William Johns-Powell, Dir, (5.47%), S Chari Ltd (5.36%), Oberon Investments (5.03%), CRUX Asset Management (4.07%), Paul Gough (3.19%), John Cronin, Chmn, (2.06%), Peter Tyler, Dir, (0.73%) and the West Yorkshire Pension Fund (0.56%).

Broker’s View

Ahead of the Full Year Trading Update due shortly, analysts Bob Liao and Carl Smith, at Zeus Capital, are looking for record profits, margins and FCF in H2, which should increase investor interest and trigger a rise in the group’s undervalued shares.

They have a DCF Valuation of 26p on the group’s shares.

For the current year to the end of last month, they look for group sales to rise to £34.5m (£18.7m), lifting it into profitability of some £2.5m adjusted pre-tax profits (£2.9m loss).

That should generate earnings of 0.5p per share against the 0.5p loss last year.

Analyst Harvey Robinson at Panmure Liberum has a Buy rating on the shares, with a Target Price of 18.5p per share.

For the year just finished he goes for £33.0m sales, £1.3m pre-tax profits, and earnings of 0.3p per share.

For the year now underway his estimates are for £40.0m sales, £3.2m profits and earnings of 0.7p per share.

My View

Securing repeat orders underscores the proven effectiveness of the group’s cutting-edge, standards-based technology, highlighting its deep expertise within India's rapidly growing smart metering ecosystem while continuing to strengthen the backbone of its smart metering infrastructure.

There is sure to be even more order activity in 2025, which will positively impact its shares.

(Profile 12.09.2024 @ 8.8p setting a Target Price of 11p*)