£IGP (Intercede): your brains required

29th Nov '21 by Robert W

4 comments 526 reads

Hi All,

I have just spent the best part of the afternoon trying to understand the investment case for Intercede (LON:IGP) (including listening to the recent Investormeetcompany.) In the end I have decided against for two reasons:

1) Despite working in IT (although not massively technical), I still can't understand what the differentiator is to tools like MS Authenticator - is it that they provide the FIDO backend so you would need MS <and> My ID?

2) I can't understand why if the tech is so good (and I acknowledge that the customer-base is impressive) that their growth is so low. I don't buy the "because of Covid" rationale at all - my company is busier than ever and I know we are not unique.

Does anyone have any answers to the above that might make me change my mind?

Many thanks, Rob.

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Mike888

30th Nov '21

My thoughts

With such clients on its books, I'd have thought that revenue ought to be significantly greater and growing fast, if those companies are embedding it at an enterprise level. So clearly they are not, and if not why not. I'm not disputing that they are clients, but at what scale.

With such impressive clients, surely that should be a signal to others, and therefore growing far more rapidly than it is

I'm sitting here as the CIO of Boeing (or any one of their other clients). Would I trust authentication and the significant internal investment costs required to implement it to a tiny little company that could go bust tomorrow, or would I go for a safer bet, a company that will be around for a very long time, eg Microsoft.

If the product was so much better than competitors, and/or the market was meaningful, why aren't big Tech considering buying them out, which would literally be pin money to them.

Maybe its very niche and specialised, maybe for its niche it can be used in a few specialised situations. If so, when did niche ever make a good investment vs scale, answer rarely.

Clearly I may be missing something, like you are Rob, but as it stands it fails the first sweep of "does it make any sense" so I have never had an urge to dig deeper.

In summary I think it needs to prove itself, because the numbers in my opinion don't tally with the story. I'm happy to miss the sweet spot on this stock and catch it on a climb if I'm proven wrong. My background is Tech Senior Management within Blue Chips.

MiserableJacktPotato

You can use it to provide web authentication in disconnected environments to a known standard. Which is good for govt which may have systems that are disconnected from the internet but need to allow access to different identity controllers (say someone in the navy needs to authenticate to an army website).
The other place it might work is for hot desk situations as you can put the auth token on a secure USB (like a Yubikey) for example, though you can do that with Windows Hello for Business too so why go to the extra expense? (I don’t think many people know you can put a WHfB token on a key rather than being forced to store in the TPM).

BnB

I had a look last week and decided that growth was too slow and operating margins too low to make it interesting at a fwd p/e in the 30s. I own PCI-PAL for tech small/micro-cap growth, valued on a similar ev/turnover for many times higher growth.

Robert W

1st Dec '21

Thanks for your considered comments guys - much appreciated. It won't be a surprise if I tell you I haven't changed my mind. It feels a bit like LoopUp to me - they may well have a good product but I really doubt it is good enough to overcome the network effect of much bigger rivals.

£IGP (Intercede): your brains required

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Robert W

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