Interactive Investor

The Insider: GVC, Imagination Technologies, Regus

26th March 2015 13:48

Lee Wild from interactive investor

GVC rising PDQ

Fast-growing online sport betting and gaming company GVC Holdings is in demand, and top brass clearly think profits will continue to grow. A day after publishing a cracking set of full-year numbers, the chairman, chief executive and wife of the finance boss have all piled in, snapping up £200,000 of stock.

GVC said Monday it had tripled pre-tax profit in 2014 to €41.3 million and clean cash profit, which strips out any non-operational items, soared by 28% to a record €49.2 million. It said the new year had started well, too.

However, the company also handed back over two-thirds of profit to shareholders via dividends and currently ranks among the best dividend payers on the market. They offer a prospective yield of 8.8% and the shares still trade on a modest forward price/earnings (P/E) multiple of 8.

No wonder chief executive Kenny Alexander spent almost £100,000 on 21,740 shares at 459.9p each on the day of the results. He now owns over 422,000 worth almost £2 million.

CFO Richard Cooper's wife followed suit with a 10,000-share purchase at a fraction less, costing almost £50,000. Cooper and his wife now hold 336,667 in total. A day later, chairman Lee Feldman paid 459p a share for 12,500 shares, taking his stake to over 135,000.

Imagination Technologies' contrarian chairman

Shares in Imagination Technologies have been hammered since last week's third-quarter results revealed "muted" licensing activity during the period. Management also warned that licensing revenue may be no better than last year - hey'd previously targeted 10% growth.

However, the sell-off has gone too far, according to new chairman Bert Nordberg. Having slumped by 16% since the figures to a 2015 low, and currently kissing the 200-day moving average, Nordberg has made a maiden purchase of 35,000 shares at 217.31p each.

Nordberg, formerly President and CEO of Sony Ericsson Mobile Communications and a technology industry veteran, took over from Geoff Shingles on 20 March.

Unfortunately, the City lacks Nordberg's confidence.  "Adjusted EBIT margins peaked at 29% in FY12 and now stand at just 14%," points out RBC Capital Markets analyst Andrew Dunn. "With opex growth controlled at 10% the pressure is on to grow the topline faster than costs. Graphics licensing and royalties have stalled, MIPS seems unlikely to impact numbers soon, and success with Ensigma has been persistently over the horizon. We continue to struggle to justify the lofty valuation."

Even now, Imagination shares trade on 43 times RBC's EPS estimates for the year to April 2015 and 36 times in 2016.

Regus rocks on

Workspace provider Regus has been chased higher in recent months (see chart), and full-year results published early March confirmed investors were right to do so. Operating profit of £104 million was up 27% at constant currency and better than forecast. Regus grew its network by 24%, too, and at a significantly lower average net cost of investment.

While some in the Square Mile think the shares are now fairly priced, plenty of others believe there's more to come. "With the outlook positive and current visibility for 400 new centres in FY15, the growth momentum is showing no signs of abating," says Andrew Gibb at Investec Securities. "As a result, we reiterate our 'buy', with the increase in our target price to 260p reflecting a rolling forward of our P/E based multiple."

Regus shares currently trade on a pricey-sounding 21 times forward earnings. However, earnings per share are expected to grow by an average of 33% a year until 2017, which justifies a more lofty multiple.

Finance director Dominique Yates believes the share price rally has legs. In the job since 2011, the chief number cruncher has just splashed out almost £100,000 on 43,273 shares at 231p each, taking his interest to 785,262 worth about £1.8 million.

Non-executive director and tax expert Alex Sulkowski is already in the money after buying 20,000 shares just after the results at 217.7p.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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