N+1 Singer have increased their price target to 226p and their EPS forecasts considerably as follows:
"We have upgraded our forecasts following the completion of the acquisition of
Perfect Commerce for up to $132.5m. This transformational deal positions the
enlarged PROACTIS group as the sixth largest pure-play provider of ePurchasing
solutions globally, as well as one of the fastest growing and most profitable. The
commercial and operational synergies arising from this combination are
considerable and warrant the acquisition multiples paid (max. 3.4x est. FY 2018
revenue and 19.0x est. EBITDA). Our FY 2018 group revenue, EBITDA and EPS estimates
increase by 105%, 119% and 18% respectively. We raise our target price from 201p to
226p and reiterate our Buy recommendation."
FYI, here's Finncap's summary of the Perfect Commerce acquisition when they raised their target price to 250p:
Subject to General Meeting, Proactis has undertaken a £70m placing and £99m acquisition of Perfect Commerce, a US-based spend management solution provider. The increased scale offers enhanced growth opportunities, extending current UK focus deeper into the US, and mainland Europe; broadens the tier 2 customer base into tier 1; extends the UK public sector focus into the private sector; adds material supplier-led revenue to the buyer-led revenue model with Perfect Commerces mature Business Network; and brings evident crossselling potential based on the contributory companies specialisations.
We upgrade our forecasts substantially (EBITDA +122%) as the acquisition accelerates Proactis boards strategy by five years and creates a global force in the spend management environment. Target price 250p, with much more upside-potential available following momentum from proof of execution.
Via reverse takeover, Proactis has acquired Perfect Commerce, a US-based spend management solution provider delivering £30m revenue and £8.9m adjusted EBITDA in FY16. After identification of at least £5m of specific synergies from deduplication, and delivery of £3m in FY18, the post-synergy EBITDA uplift of £11.5m equates to an EV/EBITDA of 8.7x. The £99.0m acquisition is funded by a £70m placing at 165p alongside debt facilities of £55m. The CEO of Perfect Commerce will become CEO of the enlarged Proactis Group, rolling part of his stake in Perfect Commerce into a $3.5m convertible loan in Proactis (for tax reasons: expected to convert into equity within twelve months).
Leading to group stats of 85% recurring revenue, 30% EBITDA margin, a global potential market of tier 1 & tier 2 public & private sector customers, Perfect Commerce brings its Business Network to the group, adding a supplier network with 15 years established maturity, now complemented by Proactis Accelerated Payment Facility module. The enlarged (buyer & supplier) customer base provides scale and opportunity to gain market share in a $5bn market growing at 10% per annum. Both companies feature amongst Gartner's 12 magic quadrant players, and the combination creates the sixth largest global pure play for spend control.
Sprinting past £100m market cap to both a larger opportunity and a larger investor base, we lift our target price to 250p, equivalent to 12.5x EBITDA and en route to the Megabuyte Accounting and Enterprise Software peer group at 17x."
"The increased scale offers enhanced growth opportunities, extending current UK focus deeper into the US, and mainland Europe; broadens the tier 2 customer base into tier 1; extends the UK public sector focus into the private sector; adds material supplier-led revenue to the buyer-led revenue model with Perfect Commerce's mature Business Network; and brings evident cross-selling potential based on the contributory companies' specialisations."
The broker has upgraded its foreacasts signficinatly, the underlying profit forecasts rises 122%, as the acquisition accelerates Proactis board's strategy by five years and creates a global force in the spend management environment.
Target price rises to 250p "with much more upside-potential available following momentum from proof of execution"."
The US business has acquired several businesses over past few years. Met the new CEO - who I thought was excellent ( bright, leader,good operational background, and seemed a good communicator . Tim back to CFO a good move also, Rod & Hampton have known each other for years and compared notes ( as they weren't competitors). Think it will be a good fit as it makes them a £50m revenue company . Now on everyone's radar as one of the worlds biggest supplier tech companies. Probably get snapped up by a giant in next few years. Too small before.
A reverse take-over i.e. small company taking over a bigger company, and the CEO of the bigger company, taking over seems quite unusual - or maybe a I am wrong.
The story appears to be that the acquiree company has a history of weaker profits, and this is a good way to get access to a capital raising market.
Could be messy or could be good. Maybe a good way for the retiring CEO to bow out. Looks like the future acquisition trail will be mainly US based? However the CFO as a veteran of PHD will hopefully make sure shareholder interests are well looked after?!
1) Acquisition is enhancing.
2) Allows increased institutional ownership, hard to achieve via market purchases.
3) Good chance it will kick start the sp
4) If Henderson didn't take part it will dilute them anyway - no bad thing.
So far I have to admire the vision of the management and execution. Let's hope that can keep it up, I think they can.
Noted Directors didn't take part and so saw the dilution.
Still think this should be north of 150p at this point and hope Henderson finish selling down.
It's coming along for the patient and if there is a downturn (when) the pressure to use the likes of Proactis will only increase. If inflation takes off (when) the pressure to use the likes of Proactis will only increase.
Results: Brilliant and due a re-rate and a move to beyond the previous all time high if Henderson can be cleared out. Even in a downturn this should prosper as no reasonable sized company will cut back on spending to save money.
Save in inflationary times, save in deflationary times, use Proactis.
Great results, Hendersons loss. They are probably just rebalancing the portfolio but they let some go cheaper than needed. We could do with an institution to just come and clear them out. In the right hands it would place a floor on the price.
finnCap published a note this morning: "Proactis has announced a contract win with P&O FerryMasters, extending the existing relationship a further five years and implementing the Supplier Network. The new platform will streamline electronic communication across the supply chain, and incorporates the potential of the Accelerated Payment Facility to the supplier base of 7,850, with a total spend environment of c£350m. While the uplift to our forecasts is minimal, the significance is material, again demonstrating the extension of an existing relationship and the..." taken from Research Tree
Still expect this to get through 142p then on to 150p. Before year end.
This can still double from here and growth is just starting as they gain penetration, traction, increased geographical reach, cross sell and offer more services. This is all before the work with Inspired Capital kicks in.
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