Evolution Securities reiterated its ‘buy’ recommendation on Geong International (LON:GNG) on the back of yesterday’s nine month results report from the Chinese focused IT firm.
In the update, Geong said it was confident of "satisfactory" results for the full year despite the onset of uncertainty in China.
Revenues were marginally lower than in the same period of 2010 at £7.6 million, however, £2.8 million of this was generated in the December quarter.
Evolution analyst Meng Li said that even though Geong’s nine month revenues accounted for just 59 percent of Evo's full year forecast for 2012, this may have been due to seasonality and accounting procedures.
The analyst also noted the strong revenue generation in the third quarter.
In the meantime, Geong’s order book stood at £14 million at the end of the December quarter, slightly below the £15.6 million at the end of September. Li said this was due to growing software-as-a-service (SaaS) contracts, which are shorter term.
The SaaS business accounted for 21 percent of total group revenues with Geong expecting “significantly higher” SaaS revenues in the final quarter of its financial year.
“Moreover, management believes that SaaS business will increase its contribution in the fourth quarter as the performance related fees are earned, which will help the company in achieving a satisfactory outturn for 2012,” said Li.
Evolution currently has a bullish target price of 50 pence per share for Geong, whose shares closed at 20.5 pence on Wednesday. The group currently has a market cap of £7.5 million.