Quindell’s (LSE: QPP) share price increased 6% to 41p during early trading this morning on the announcement that the firm has signed the world’s largest telematics contract.
The contract is part of a joint venture with the RAC in which a new company, Connected Car Solutions (CCS), will distribute Quindell and the RAC’s “combined connected car capabilities” in the UK and Canada.
Quindell has upgraded its target for paying subscribers by 20%, each to be paying between $5 to $15 per month, equating to $720m to $2.2bn in recurring technology revenue.
To fund CCS, Quindell and the RAC have agreed to an initial investment of £30m, split evenly between the two companies — increasing to £70m subject to key milestones.
Quindell doesn’t see any requirement to raise new capital to meet funding obligations for CCS, or to meet its own organic growth targets. Part of the funding will be met by £50m set aside for acquisitions.
Rob Terry, Quindell’s executive chairman, commented:
“We are delighted to announce this significant new contract with such a distinguished and respected brand as RAC. This agreement once again validates Quindell’s significant market leading model, which we believe will revolutionise the insurance industry, through a combination of innovative technology and integrated supply chain stamping down the cost of claims whilst above all improving the customer experience for the brands who choose to partner with Quindell.”
Analysts expect Quindell to reveal earnings per share of 4p in 2014, so based on their current price, shares in the AIM-listed outsourcing firm may trade on a foreward P/E of 10.
Of course, the decision to ‘buy’ — based on today’s announcement, and the ability of Quindell to deliver future earnings growth — is entirely your own decision.