Charles Taylor PLC (LON:) – Cash Offer
Share Price 235pMkt Cap £183mConflict Disclosure: No Holding- Offer – Cash offer of 315p is a 40% premium from a US private equity firm, Lovell Minnick.
- Valuation – The offer price represents a PER of 12.3X estimates 2019 earnings. The company has average debt in the region of £60m, a pension deficit of £28m and deferred consideration of £10.9m at Dec 18. The EV is therefore £344m, representing a respectable EV/EBITDA multiple of 8.9X.
Conclusion -This looks like a good escape for shareholders. The price is not excessive but this complex business will have a limited number of buyers. While the buyers says they will support management I suspect a break up may be the result as there are global firms such as Cunningham Lindsay who would buy the adjusting business which has entirely different dynamics to the high ROE cash cow of the mutual business. A useful end to a 20 year path of value destructive acquisitions. I find myself wondering with the weak pound and low equity markets how many other companies will fall to overseas private equity.IG Group (LON:) –
Share Price 578p
Mkt Cap £2,137m
Conflict Disclosure: I Hold
Results – IG Group reports flat revenues on the prior year. Driven by favourable markets in August and higher active client numbers. The company reports relative to the average quarter of last year as revenue declined over the year and states its performance relative to its stated targets of 3-5% core growth and £100m from significant opportunities by 2022. Core grew 9% above the average of last year and significant opportunities delivered £19.9m revenue in Q1.3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure
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Conclusion – There are cynics who doubt the performance of the companies targets, but this provides reassurance. Australia was 15% of revenue last year and this may come under pressure but I suspect all these companies will recover over time. 2022 forecasts are considerably lower than the companies guidance and the company trades at 11.4X the 2022 forecasts. There may yet be upside on forecasts and in the meantime there is a useful yield.
Begbies Traynor Group (LON:) – AGM Update
Share Price 75pMkt Cap £93mConflict Disclosure: No Holding- Update All areas have continued to perform well on the back of national insolvency appointments up 9% in the first 6 months of 2019.
- Estimates Trading is in line with expectations for £8.5m PBT and 5.5p EPS
- Valuation PER 13.5X Dec 2019, yield 3.7%
Conclusion The ROE is increasing on the back of useful acquisitions while their markets are helping. This company could have a good year or two ahead. Having raised £8m in July the company could make further enhancing acquisitions. I can see 20% upside. Gateley (LON:) – AGM Update
Share Price 166p
Mkt cap £184m
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Conflict Disclosure: I Hold
Results Trading in line with expectationsEstimates 21% PBT growth expected to £19.4m and EPS 14pValuation PER 12.6X yield 5.2%Conclusion This company rather prides itself on being dull which it is delivering on. Useful yield. I suspect the share price will follow the earnings.
Tungsten Corporation PLC (LON:) –
Share Price 44p
Mkt Cap £56m
Conflict Disclosure: No Holding
Update Revenue in Q1 up 5% to £8.8m which has delivered £1m of EBITDA and an operating profit of £2.3m. Cash is down to £2.2m. Outlook is unchangedEstimates PBT expectations for April 2020 are for £1m PBT which looks lightValuation £38m revenue is expected in 2020, while the company has delivered an 11% margin in Q1. The company has the potential to make high margins given the platform nature of the business. It trades at 1.15X revenue.Conclusion This company is looking dangerously like it has passed through the eye of the needle. While we can’t discount entirely the possibility of an equity issue the valuation could double if the current improvements continue.
