Stilo International

Stilo International is a company that I have bought shares in over the past year or so, buying at prices between 3p-5p. It's a micro-cap which is making excellent progress and describes itself as follows:-

"The Company provides software tools and cloud services that help organisations create and process content in XML format, so that it can be more easily stored, managed, re-used, translated and published to multiple print and digital channels. "

It sounds a bit boring and niche to me, and exactly the sort of company I like.

The company has been listed for several years and hasn't really fulfilled it's promise yet. It appears to have been long forgotten by many investors.

However, all that appears to be changing.

In their last reported results, sales revenues had increased by 20% and operating profit leapt from £89,000 the previous year to £255,000. EPS doubled to 0.28p (on a fully diluted basis) leaving the shares on a p/e ratio of around 19 at the current share price of 5.5p.

This is another rare example of a profitable, cash generative and dividend paying Aim company which is under the radar of many investors.

Gross margins are massive at 99%. The company is growing revenues, profits, and cash generation. The current p/e of around 19 might look high, but given that increased revenues pretty much drop through to the bottom line then the p/e will fall quickly and Stilo will look very cheap. Add to the mix a progressive dividend policy (hiked by 33% last year), no debt and a very solid balance sheet and the company also looks low risk given it's size.

Stilo boasts three core technologies in OmniMark, Migrate and AuthorBridge. OmniMark is used in the development of Migrate, and both Migrate and OmniMark technologies are utilised in AuthorBridge, which results in very efficient integrated development and support activities.

It's the latter two which will drive growth in the company. Migrate sales improved by 61% in the year to December 2015. AuthorBridge is being rolled out this year and will start to make a significant contribution to revenues from 2017 onwards.

Their recent trading statement indicated that trading for 2016 is in line with management expectations, and they had this to say about AuthorBridge:-

"We continue to invest significantly in the ongoing development of AuthorBridge, our new cloud XML authoring tool. Following extensive testing by a very prestigious client, it is now scheduled to be deployed by them in full production in May 2016, representing a significant milestone for the Company."

It's highly likely that the very prestigious client is IBM.

Despite a Director sale on 10 June which I comment upon here:-

http://uk.advfn.com/cmn/fbb/thread.php3?id=25760470 (post 1503)

I believe that the company has excellent growth prospects with a short, medium or long term view, and with a solid balance sheet, no gearing and a progressive dividend policy, the share price should be well supported as investors await news on their progress.