CORPORA

Been tipped on watshot.com by Luke Heron

Corpora is back on the acquisition trail - the text analysis software company has announced it had signed a contract for the acquisition of Tokairo, a maker of specialist document capture and document management technologies. The acquisition is scheduled to complete after the company's AGM in January. Corpora will purchase Tokairo for a total consideration of 1.55 million pounds of which 125,000 pounds is payable in cash on completion with a further 125,000 pounds cash payable 60 days after completion. The remainder of the consideration will be satisfied by the issue of tranches of shares at 20 pence per share or the mid-market value on the day of issue, whichever is the higher of the two.

Tokairo brings to Corpora an impressive document management solution which appears to be a perfect fit for the growing group. The ease of installation, competitive pricing and quick return on investment to clients were the main features that attracted Corpora to their solution. The numbers aren't shabby either, and cost efficiencies can almost certainly be implemented quickly. For the year to 31st March, Tokairo delivered sales of 1.897 million pounds, with gross profits of 1.498 million pounds and a pre-tax loss of 191,609 pounds. However, this loss was declared after interim financial management fees of 99,813 pounds, founder director drawings of 203,942 pounds and founder director pension contributions of 354,449 pounds. This makes a total of some 658,204 pounds. In short, Tokairo is a very profitable operation and Corpora really has bagged a bargain here.

The acquisition of Tokairo gives Corpora an additional boost to its US presence and brings to the Company strong relationships with a number of large public and private sector clients, including several State Police Departments, the Federal Bureau of Investigation, Universities, and multiple commercial clients spread across the United States. Tokairo's office in Austin, Texas will become a key sales hub for the enlarged group. There are very clear cross-overs between the two companies' technologies which Corpora quite rightly expects to build upon very quickly. Tokairo has many large clients with large numbers of documents managed by Tokairo technology. Corpora's core expertise is in adding value when searching for, or reading such documents. It is an exceptionally good fit for the business.

Meanwhile, Corpora is continuing to win new business. This is a company that knows how to communicate with the market and with the hive of activity currently underway at the rapidly growing group, I imagine we won't have to wait too long before our next newsflow development. The stock is still undervalued based on my projected earnings for the current year of 1.25p, though the recent acquisitions of iOra and Tokairo are likely to impact on these numbers. Contracts are being signed at great pace and the business has clearly reached an important stage in its development, with the acquisition providing a useful foothold in an important, related market. The hard work and losses as a result of significant investment over previous years should now start to bear fruit. I will add one caveat here, which is that my earnings projections exclude the 2 million pounds a year in goodwill amortisation, which is payable for another four years, so in effect it should really be read as a cashflow multiple. However, at 12.5p, this remains a stock worth backing. My stance remains "buy".