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I reserve a small part of my portfolio for promising small-cap shares. That’s as a result of they’ve tonnes of room to develop in the event that they develop into profitable. Take a look at FTSE 100 agency Ashtead. It was a penny inventory in 2008!
Windward (LSE: WNWD) is an AIM-listed share that I lately purchased. The share value is up 179% in 12 months, giving the agency a market cap of £90m.
Right here’s why I like this software program firm’s prospects.
Digitalising the worldwide maritime trade
Windward makes use of synthetic intelligence (AI) to supply danger administration options to corporations and organisations within the world delivery trade.
These vary from oil supermajors and port authorities to banks, freight forwarders, commodity merchants, and insurers.
Its cloud-based, all-in-one platform incorporates information from numerous sources to foretell and mitigate dangers.
For instance, it provides options like route optimisation, the place AI identifies the most secure and best delivery routes primarily based on climate patterns, piracy threats, and port congestion.
It additionally carries out real-time cargo safety danger assessments and tracks vessels to make sure adherence to environmental laws and sanctions. And its options can now be delivered immediately onto buyer and third-party platforms.
Unsure world
As we all know, it may be carnage on the excessive seas as of late.
Houthi rebels have launched dozens of assaults on business ships within the Pink Sea and Gulf of Aden since November. And I’ve simply been studying that Somali pirates are again and bolder than ever.
Windward says it gives an “AI-powered risk profile for every vessel in the world”. So I feel it is a very related service in at the moment’s unpredictable world.
Sturdy development
In 2023, Windward’s income rose 31% yr on yr to $28.3m, whereas its EBITDA lack of $5m considerably decreased from the yr earlier than ($12.1m).
It elevated its buyer rely to over 200, up from 132 on the finish of 2022. This noticed its annual contract worth develop 35% to $34.5m, offering a stable foundation for additional development.
Nearly all (99%) of its income is subscription-based, with a 7.5% churn price general however none in key authorities clients. In the meantime, its gross margin expanded from 72% to 79%
Looing forward, administration says it has “a clear pathway to achieving positive EBITDA”, and it had a year-end internet money place of $17.3m to assist it get there.
An ocean of potential
Now, that is nonetheless a penny inventory, so above-average volatility will be anticipated.
Furthermore, there are different software program companies on this area, whereas additional AI rivals might emerge as the worldwide maritime trade grows. So competitors may develop into a key danger.
That stated, I’m very inspired by the agency’s rising roster of blue-chip clients and companions right here. It has deepened its partnership with London Inventory Change Group by integrating a number of the latter’s World-Examine providers into its platform.
And INTERPOL, the world’s largest worldwide police organisation, has chosen Windward to assist it determine and forestall drug trafficking, human smuggling, and unlawful fishing.
This implies to me that Windward is constructing a aggressive benefit by its AI-first method, setting it up for additional development because it provides extra providers and – hopefully – clients.
All however 10% of worldwide commerce sails by the ocean, so it is a very giant market alternative the corporate is pursuing. In line with administration, it’s price over $10bn.
I’m interested by shopping for extra shares in Might.
