Scripscan: California Software Company Ltd
cmp:30
Code:532386
Story:The company's product-cum-service-based revenue profile accruing from three different segments — commodities solutions, enterprise solutions and technology solutions is very atractive which I like a lot. As a relatively small player, California Software can capitalise on the robust demand from these segments.While the company has forged relationships with clients such as Microsoft, Nortel, HP and Sony, its relative scale and size may prove to be a disadvantage in terms of growing these relationships in the coming years.Though competition is likely to be intense, some of the niche segments such as education or healthcare can open up opportunities for sustained growth. It has also made some acquisitions to penetrate these segments. The profit-before-tax margin is likely to improve only if the niche segments are exploited judiciously.As a part its Commodity solutions segment the company has developed trading, risk management and procurement solutions for commodity traders and consumers in the shipping and bunkering business. It has also developed a suite of integrated products for the oil chain supply segment. Since the competition in this segment is not high, it can prove to be a strong growth driver of the future.Its strong clientele, especially in the US, inorganic growth moves and decent financials lend confidence to its overall expansion strategy. On the flip side, however, the long sales cycle in procuring orders, high client concentration, sharper competition in the offshoring arena and low margins in select segments may put pressure on order flows in the medium term.Shareholders can consider investing in the scrip at lower levels.However, this investment will be suitable for those with a high-risk appetite and a medium-term outlook.
Tuesday, October 13, 2009
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