finnCap Research Company Notes - 4 February 2020

Feb 04, 2020 / News

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Sector: Support Services

DX (DX) : Corp

Improved service levels and new business

Key data                              

  • Share price (p)                  12.1
  • Target price (p)                18.0
  • Market cap (£m)                              69.6
  • Enterprise value (£m)                    70.9

In a positive H1 update, DX has confirmed it is on track to achieve full-year expectations. H1 trading is described as encouraging, with performance benefiting from improved service levels and increased new business. Further progress is expected in H2. We reiterate our view that DX is well placed to continue along its recovery path, providing a service that customers both need and value. We believe that the free cash flow potential post turnaround will support a significantly higher share price.

Guy Hewett

020 7220 0549

ghewett@finncap.com

 

 

Sector: Support Services

Barkby Group (BARK) : Corp

Developing a range of upside potential

Key data                              

  • Share price (p)                  39.5
  • Target price (p)                40.0
  • Market cap (£m)                              54.7
  • Enterprise value (£m)                    59.5

The recent Barkby reverse takeover gives shareholders the opportunity to invest alongside a team that has generated significant returns in property development and the hospitality sector. £5m equity (gross) has been raised to support existing businesses and invest in two early-stage but high potential returns businesses. There is solid valuation support from the property development and hospitality businesses, with the new investments offering significant upside as leaders in large markets.

Guy Hewett

020 7220 0549

ghewett@finncap.com

 

 

Sector: Industrial Technology

Alumasc (ALU) : Corp

Interim results, cost reductions on track for the full year

Key data                              

  • Share price (p)                  107.0
  • Target price (p)                150.0
  • Market cap (£m)                              38.5
  • Enterprise value (£m)                    58.2

On lower revenue, H1 profit and dividend were both maintained. Despite a challenging H1, operations are responding to management action and despite the greater H2 weighting remains on target to achieve existing full-year expectations, with £2.0m of cost savings on track, a turnaround in Levolux performance, much lower pension deficit, reduced annual pension costs and a 10% increase in the order book. The shares have started to respond, with some improvement in post-election optimism in the construction sector. The shares remain significantly undervalued and we raise our price target from 122p to 150p, with 37% EPS recovery prospects and attractive 6.8% dividend creating a compelling mix that should produce share price outperformance.

David Buxton

020 7220 0542

dbuxton@finncap.com

 

Sector: Financial & Insurance

K3 Capital (K3C) : Corp

Pleasing organic growth amid very difficult backdrop

Key data                               

  • Share price (p)                  248.0
  • Target price (p)                298.0
  • Market cap (£m)                              104.7
  • Enterprise value (£m)                    98.9

Despite Brexit uncertainty and the calling of a general election, K3 has delivered a strong performance in a challenging environment, suggesting the company will benefit from the political stability brought about by the recent Conservative majority. Some market-wide uncertainty remains, but the board is confident that FY20 expectations will be successfully achieved. Results to 30 November are in line with our forecasts, as EBITDA is 47% of our full-year number (H1 three-year average: 55%). We also note that December alone (first month in H2) generated £2.4m of revenue and £1.3m of EBITDA (taking K3 to 57% of our revenue estimate and 64% of EBITDA with five months remaining). We increase our target price to 298p, using a 20x multiple on our 2021E EPS of 14.9p.

Nik Lysiuk

020 7220 0546

nlysiuk@finncap.com

 

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