Historically, the UK tech sector hasn’t been as hot as in the US. Yet there are some smaller companies that are very exciting in this space. I think I’ve spotted a UK stock in the FinTech market that’s already doing well, but could really take off in coming years. Here’s the lowdown.
Details of the business
The firm in focus is Beeks Financial Cloud Group (LSE:BKS). The business was formed in 2011 and went public back in 2017 with an IPO raising £7m. It now has a market-cap of £74m. Over the past year, the share price has fallen by 26%. I know small-cap stocks can be very volatile, and this is a classic example.
Beeks focuses on providing financial technology support to businesses, predominately in the trading and investing space. It offers a plug-in to provide all the financial infrastructure to a business. This includes the likes of dedicated servers, managed cloud storage and connectivity to financial markets and exchanges.
It boasts some large clients, such as CME Group and VMware. Ultimately, being a small company doesn’t hinder it, as the quality of the product should sell itself. Given the traction it has already generated thus far, I think the future looks promising. The ability to have gone through the due diligence checks and sign-off to supply these large firms is a badge of honour.
Reasons to buy
Beeks puts over a clear reason for investing when it mentions it “is ideally positioned to benefit from long-term trends towards cloud-computing within the financial services industry.”
It’s true that companies are moving more towards storing and using data in the cloud. This trend has been in play for a few years, but this is a multi-decade theme that will continue to play out.
The growth in revenue shows demand is growing. The financial year runs June-June, so the current year is just finished. The June 2021-2022 year showed a 57% jump in revenue versus the previous year. The half-year results from February showed a further jump of 35% versus H1 2022. The company is profitable when reviewing the profit before tax numbers.
I’m also impressed with some of the significant shareholders of the business. This includes asset managers such as Lombard Odier, Cazenove and Artemis. Clearly, I’m not the only one that thinks this could be a good long-term purchase.
Inherent small-cap risk
Small-cap stocks carry risk with the volatility in the share price swings. Aside from that, there are other risks to note.
For example, the founder, Gordon McArthur, owns 37.59% of the shares. This means he still has a strong say on business decisions. This can be a good thing, but is also a risk if he makes the wrong calls.
I believe this UK tech stock can do very well in coming years and so think investors should consider buying.
