Why the COSOL (ASX:COS) share price is running 6% higher

The COSOL Ltd (ASX: COS) share price was one of the best performing IPOs from last year. Here's why its shares are higher today.

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The COSOL Ltd (ASX: COS) share price opened 6% higher today after receiving an extension to its Department of Defence Enterprise Resource Planning (ERP) program

At the time of writing, the COSOL share price is up 5.7%, trading at 74 cents.

Let's take a look at what the Brisbane-based digital business solutions provider announced in its release today.

About the project extension

The Department of Defence ERP software upgrade is a well-publicised program anticipated to be a $1 billion project that could take up to eight years to complete. Back in July 2019, IBM claimed a $95.5 million one-year contract that covered the initial design work for the SAP-based ERP upgrade. 

On Tuesday, IBM subcontracted COSOL to provide its proprietary IP and professional data migration services for the Department of Defence program. 

COSAL valued the current project work at $8.5 million of revenue and expects to complete the work between April 2021 and December 2022. The project will positively contribute to the company's FY21 earnings.

Management commentary 

COSOL Australia CEO Scott McGowan believes the contract reflects the longstanding relationship with IBM and the company's proven expertise to deliver solutions to the defence sector. 

COSOL is thrilled to be partnering with IBM and the Department of Defence. The fact that COSOL has been contracted for end to end data migration responsibility demonstrates the confidence that IBM and the Department have in COSOL to deliver this complex project.

We also want to acknowledge and thank IBM for their commitment to the Australian SME community. The award of this new work is the latest win from COSOL's strategic pipeline of SAP data migration opportunities based on the strength of COSOL's digital transformation expertise and capabilities.

COSOL share price snapshot 

COSOL was one of last year's best performing initial public offerings (IPOs), surging from a listing price of 20 cents in January 2020 to a high of 93 cents by August 2020. Its shares have taken a breather and are currently trading around the 70 cent level, which represents a market capitalisation just shy of $100 million.

Despite its size, the company does make a profit, with its half-year results highlighting a 36% increase in net profit to $1.8 million and 45.4% increase in revenue to $15.65 million. The company believes its 2H21 revenue is expected to be 23-25% above 1H21. 

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