Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

GB Group: Strong Organic Growth In H122

Published 01/12/2021, 09:22
Updated 17/08/2023, 13:25

GB Group (LON:GBGP) reported a strong performance in H122, with organic constant currency revenue growth of 12.6% y-o-y and an adjusted operating margin of 25.5%. The Acuant acquisition completed on 29 November and the group’s immediate focus is on combining the two companies and pushing forward with growth plans. Our forecasts are substantially unchanged.

EPS Estimates

Strong underlying organic growth in H122

In H122, GBG reported revenue growth of 5.4% y-o-y or 12.6% on an organic constant currency basis, with all divisions growing at a double-digit rate. Adjusting for exceptional revenue benefits from cryptocurrency trading and the US stimulus programme, GBG generated underlying revenue growth of 17.6%. The adjusted operating margin of 25.5% was ahead of the pre-Acuant target of 22–23% but is expected to decline to more normal levels in H222 as hiring accelerates and one-off revenues do not repeat. The company closed H122 with net cash of £39.5m. Our forecasts are substantially unchanged.

Focus shifts to integration of Acuant

The outlook for H222 is in line with board expectations and the focus now shifts to integrating the recently completed Acuant acquisition. The deal strengthens the group’s presence in the US, the largest identity verification market globally, and broadens GBG’s product range. The combined group is now in a better position to meet customer requirements for end-to-end solutions, providing a point of differentiation from high-profile, privately owned point solution providers.

Valuation: Not fully capturing growth potential

The stock has regained some ground since the 19 November placing at 725p. On our revised estimates, including Acuant from 1 December, GBG is trading at a premium to identity management (IDM) peers but at a discount to higher-growth, lower-profitability identity access management (IAM) and cybersecurity (CS) peers. However, our reverse DCF calculates that the share price is factoring in revenue growth of only 8.5% from FY25, well below the double-digit growth rate previously factored in by the market. Considering that Acuant is expected to grow faster than the original GBG, this appears overly conservative. Using a 12% growth rate (the lower end of new management guidance) from FY25 would imply a per share value of 950p.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Share price performance

Share price performance

Click on the PDF below to read the full report:

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.