Pie Funds

These days it can be tough to find an undiscovered gem with recurring revenue. The market is seeking out and applying a premium to companies with recurring revenue given the benefits of earnings visibility and compounding. However, we think we have found one such company that is still small enough to be flying under the radar – ICS Global.

logo-icsglobal.pngICS is an ASX-listed medtech company that owns MBC, the largest medical billings and collections provider in the UK market. MBC has recorded 24 consecutive years of growth and has a market share of between 5-10% in the UK. The company is now focusing on acquiring larger private medical clinic clients after winning its first clinic in January 2015. 

ICS takes a clip equating to about 4% of billings collected through its software. It offers clients a discount in the first year to get them on board, and clients have proven to be very sticky for the company. 

The value proposition for users of MBC’s product is strong. The software aims to maximise billing revenue and can increase client net income by some 25%. Offering a more efficient collections solution, MBC has helped to reduce clients’ bad debt to less than 0.5%. By automating this process, consultants have more time to focus on growing clinic revenues, which in turn means more billings going through MBC’s software. 

Yesterday ICS provided a strong trading update, with revenue up 40% and profit up more than 50% for the first four months of FY16. Although still very small, with a market cap just shy of $11m, the company is growing rapidly. 

With plans to penetrate the clinic market and invest in its software capabilities, not to mention more than $20m of available tax losses in Australia, we think ICS is a screaming buy. As such, we have recently increased our position and now own a significant chunk of the company. 



Comments

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Patrick Poke

Looks like a quality business with a bright future, definitely putting this on the watch list for further investigation.

Bill Fleming

I can't seem to get enough info. on medical billings and collections. It seems a pretty shaky sort of service that could be easily done in house

Patrick Poke

Hi Bill, I can't speak for Pie Funds at all here, but my own personal view (not that of Livewire Markets) is that the appeal here comes from the reduced amount of administration & work for the doctors office. It's definitely something that can be done in house, from what I gathered that seems to have been the traditional way, but ICS seem to offer a better way of managing it. I don't own shares in ICS but it has been on my watchlist for a while... Judging by my earlier comment, it might have been after reading this.