As the stock market bull run rages on, investors are finding it increasingly difficult to unearth genuine bargains in today's market. The good news is that there are still plenty of attractively-priced value stocks to be found if you know where to look. If you don't believe me, just take a look at these two high-achievers that are still trading on unbelievably low valuations.
Designing software for the gambling business is a specialist industry where reputation counts for everything. That is why Playtech (LSE:PTEC), one of the world's largest specialist gaming software producers, has been able to grow profit at a rate of 20% per annum for the past six years as sales have expanded at an average rate of 30% per annum.
Vp said the Competition and Markets Authority is investigating its acquisition of Brandon Hire Group. Prior to completion of the deal, Vp said it conducted a detailed due diligence exercise, including assessing potential competition considerations.
It said it would fully assist the CMA with its enquiry and provide further updates to the market when appropriate.
At 9:43am: (LON:VP.) VP PLC share price was -25p at 855p
VP (LSE:VP) extended its recent upward charge on Tuesday thanks to the release of terrific first-half trading numbers. The small-cap was last up 4% on the day, meaning that its market value has swelled 17% during the past fortnight alone.
VP, which provides a variety of rental equipment in the UK and abroad, advised that revenues charged 12% higher between April and September, to £136m. This saw profit before tax and amortisation improve 13% year-on-year, to £21.2m.
Vp is a specialist rental business providing equipment and services to a wide range of markets including civil engineering, rail, oil and gas exploration, construction, outdoor events and industry, primarily (>90% FY19 sales) within the UK, but also from overseas.
Encouragingly, the existing business continues to bang out “excellent” numbers, such as today’s interims. Here, headline adjusted PBTA came in at £21.1m up 13% (vs £18.7m LY) on turnover 12% higher to £136m (£121.7m) - delivering EPS of 44.2p (+17%), 16% ROCE and a 6.8p dividend (+13%). Divisionally, the UK continues to be the standout performer, contributing 88% and 94% respectively of H1’18 revenues and EBIT - reflecting robust performances from construction, housebuilding, AMP6 water spend and infrastructure, particularly boosting Hire Station and Groundforce.
The trick to successful M&A is knowing the target inside-out, not over-paying and then integrating flawlessly to deliver the desired synergies. To us, on all of these fronts, Vp’s canny £68.8m purchase of Brandon Hire (924 FTEs) on 7th November (from private equity house, Rutland Partners) scores highly.
The price is attractive, equivalent to 2016 EV/EBITDA, EV/EBIT and EV/Book (debt/cash free) multiples of 5.6x, 11.5x and 1.9x – representing a discount to the sector and offering an immediate 8.7% Return on Investment (RoI, pre-integration). Although Brandon is not anticipated to make a material contribution to profits in FY18, we reckon there is plenty of scope to lift EBIT margins from 7.5% to >10% in due course, thanks to: cost/procurement savings, synergies, economies of scale and improved asset/inventory utilisation.
Strategically too, the deal looks a neat cultural, geographic and customer fit with Vp’s Hire Station (HS) unit. Indeed, with a branch network of 143 (typically smaller) sites, Brandon is a national operator servicing circa 20,000 SMEs, with regional ties to the South West, Wales and in/around towns.
Better still, the transaction should be strongly earnings accretive, with our FY19 adjusted EPS forecast climbing 17% from 78.3p to 93.3p. Similarly pushing up our valuation to 970p/share (vs 890p), equivalent to circa 11x and 6x next year’s EBITA and EBITDA for the enlarged group.