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Good to see 30,000 shares bought this morning in three tranches, at steadily increasing buying prices up to 89.75p.
WH Ireland's 140p valuation seems quite conservative imo.
With a cash pile of 37p per share, and 10p EPS forecast this year, a 140p share price would put TST on an ex-cash P/E of only 10.3.
Given this record of PBT and EPS I'd say that multiple is perfectly reasonable.
And the PEG is just 0.28, which is ludicrously cheap:
2021 - £0.2m PBT
2022 - £0.4m PBT
2023 - £0.7m PBT
2024 - £1.0m PBT (forecast)
And for EPS:
2021 - 4.0p
2022 - 6.6p
2023 - 7.6p
2024 - 10.0p (forecast)
WH Ireland today reiterated their 140p price target (increased recently from 120p).
They summarise:
"Full year results: Recurring revenue strategy delivers further profit growth
Touchstar is a supplier of mobile data computing solutions and managed services to a variety of industrial sectors. This morning’s full year results reflect the outcome of a multiyear strategy coming to fruition for the group, with recurring revenue growth of 8.7% delivering overall revenue growth of 7.1% and in turn a 60% increase in PBT to £0.7m.
Over the past few years, Touchstar has focused on enhancing the returns from their product offering through a shift towards recurring software license and hardware maintenance revenues, whilst also charging a fair rate for customer requested software updates. Each of these strands continued to grow in excess of overall revenue growth in FY2023, delivering further improvement in gross margin, reaching 63.6% in H2 2023 up 19bp from 61.7% in FY2022A.
With FY2024E reported to have started to plan, we expect this strategy to drive further organic growth in the coming years, with additional potential for expansion into new overseas markets and strategic M&A.
Trading on an FY2024E PE of 9.5x and EV/EBITDA of just 2.6x, underpinned by £3.0m of net cash (37.5% of market cap), we see scope for the shares to continue to move higher as further growth is delivered. We see fair value at 140p."
"WHI view:
With recurring revenues reaching a new high of 40.4% in the period, we are encouraged by further progress against the group’s strategic aims and believe this should help drive continued organic revenue and profit growth in future years. With the potential from new overseas markets, product improvements, and M&A, we see scope for the shares to continue to move higher as further growth is delivered. We see fair value for the shares at 140p."
Much appreciated rivaldo. Very helpful.
TST's recent history and profitable turnaround is worth recording. WH Ireland's numbers are as follows:
2021 - £0.2m PBT
2022 - £0.4m PBT
2023 - £0.7m PBT
2024 - £1.0m PBT (forecast)
And for EPS:
2021 - 4.0p
2022 - 6.6p
2023 - 7.6p
2024 - 10.0p (forecast)
I'd say this is rather impressive progress! And all now backed up by the £3m cash pile and 40% recurring income.
Yep, good results and no surprises. Cashflow looks fine and cash has only declined due to the divi and share buyback.
Bizarre SP action this morning. Thought they'd be a spike up early doors but the opposite has happened, albeit on very low volumes. Managed to buy a few more at 85p, something i thought was impossible at 7.30 when i read the RNS.
Really can't see why this isn't trading in the 120p range.
WH Ireland have increased this year's forecast to 10p EPS (up from 8.7p EPS).
PBT is at £1m, up from last year's £0.7m.
The dividend is also increased to 2.75p (from 2p).
The cash pile is forecast at £3.1m, from £3.4m due to the raised dividend and likely further £300k of share buybacks.
You have to assume that WHI would have been guided by TST in publishing these numbers, and IM is generally pretty cautious in his assessments.
There may have been a few short-term traders exiting who bought in the last few days, and TST's volatility is obvious in the small number of shares traded against today's drop. Certainly short-termers might look at the order book and possible H2 weighting as reasons for doubt.
But overall TST looks in fine fettle imo given the macro climate, and well backed against a derisory £7m m/cap given its high recurring income and £3m cash pile.
Thanks rivaldo. Any new broker forecasts released today? SP is surprisingly down on good news. I thought the market would be pleased targets have been met given lack of recent news flow.
In addition to my previous post, there's also:
- growing recurring income now above 40% of turnover
- a big increase in overseas sales to almost 10% of turnover from just 1.3% in 2022
- usage of AI which TST has already been using "for several years"
- growth potential via cross-selling etc in CCTV and fire alarm systems
- further growth in overseas sales from a standing start, with "a number of export opportunities in 2024"
- and potential for M&A using the £3m cash pile
Incidentally, the dividend will be paid on 19th July per today's RNS, so the prior poster's query/info was completely incorrect!
I'm happy with the steady progress being made. Growing the international business and a progressive dividend policy.
It's the predictive software they are developing! :)
Yes, good results, pretty much as flagged in the recent TU. I top sliced a few shares earlier in the week but am holding the rest for the long term. Let's hope the company gets more visibility and liquidity improves.
Dividend to be paid 20 June to holders as at 21 June?
That's a new one!.
Today's results reflect TST's excellent value, with PBT up 60% to £675k, 7.63p EPS, a 2.5p dividend and a £3m cash pile equivalent to 37p per share.
If you strip out the cash, then TST are on a historic P/E of just 7.6.
Most importantly, TST have confirmed that 2024 has "started to plan" and "expectations are unchanged", so WH Ireland will presumably reiterate their forecast of an increased 8.7p EPS for this year.
Plus the £3m cash pile is actually understated given some customer payments received in early January 2024 and a delayed customer go-live date deferred until 2024 (which will presumably also help 2024 revenues).
Good in particular to see the following re both the further rollout and expansion of requirements:
Https://www.touchstar.co.uk/blog/british-sugar-cctv
"As an NSI Gold system provider and installer, British Sugar were reassured that they had invested in a quality solution and are now looking to use the Newark site installation as a global standard to rollout out to the remaining three sites.
British Sugar are also considering extending the solution requirements, working with TouchStar to include full support and regular preventive maintenance to enable a futureproof, scalable, and robust CCTV system"
I agree that it looks cheap. But it is depressing how thinly traded the stock remains, even after the buyback announcement. Just one to keep in the bottom drawer I suppose.
TST is a transformed company, with rising sales, profits, a £3m+ cash pile, new software and other products now commercialised, substantial recurring revenues, international sales prospects and a vision led by an experienced Chairman.
Plus a very positive outlook statement for this year.
TST managed to raise margins such that PBT increased 60% and is expected to increase another 40% this year, to give a £1m PBT against an £8m m/cap.
TST are now on an ex-cash P/E of just 7.0 for this year. Jim Slater's PEG is only 0.48.
These indicate that TST is now on a bargain valuation.
WH ireland summarise today as follows FYI:
"Today’s full year trading update demonstrates the progress that has been made in the business, with the execution of Touchstar’s multi-year strategy coming to fruition in a material improvement in profitability in FY23.
While our forecasts imply further organic growth as the group continues on its trajectory towards higher margin software licence and recurring revenues, we also note the very healthy net cash position (making up ca. 39% of the market cap), which brings the potential for bolt-on acquisitions, value being realised through further share buybacks, and further internal investment opportunities.
With the shares currently trading on a FY 2024E EV/Revenue of just 0.6x, EV/EBITDA of 2.4x and PER of 10.8x, we continue to see significant upside for the shares. We see fair value for the shares at 140p (previously 120p), which would imply a FY 2024E EV/Revenue multiple of 1.0x."
WH Ireland have raised their valuation for TST to 140p (from 120p).
They've also updated their numbers. They have £7.2m turnover for last year (up from £6.7m in 2022), rising to £8m this year and £8.5m next year.
They now forecast 7.6p EPS for last year (up from 6.6p in 2022), rising to 8.7p EPS this year and 10.0p EPS next year.
The cash pile is due to rise to £3.4m this year and £3.8m next year, with the dividend rising to 2p and then 2.5p.
With that cash pile now backing up almost 40% of the m/cap, for me it represents firstly a backstop in terms of NAV and share price downside, and secondly an opportunity as TST have stated that they wish to expand either or both internationally (via partnership) and by acquisition. So given that the cash pile puts TST in the position to do so this potential may well be recognised in the share price at some point by canny investors out there.
The 2023 trading update notes that PBT will be 60% up on last year at around £0.65m, so this and revenues will be just slightly behind forecasts - but EPS will be "well above" expectations due to a lower tax charge and the buybacks.
I'd guess EPS is likely to be around 7.5p. The 2024 forecast is already 8.7p EPS, but this may be increased due to the buybacks.
The cash pile is steady at £3m - almost 40% of the m/cap. So the historic ex-cash P/E is only around 7.5.
Most importantly, the outlook for 2024 is extremely positive:
"Trading remains on track for 2024 to be a year of
· Further revenue growth
· Maintenance of healthy margins
· Positive cash generation
· Progress in profitability
Ian Martin, Chairman, commented: "Touchstar entered 2024 in good shape. In the market sectors in which we operate activity continues, which gives reassurance for the outlook in 2024. The medium-term prospects for the company have improved. The team is now focussed on making such opportunity a reality, enabling a long term continuation of the positive trends in financial performance, building upon the solid platform we have developed and making Touchstar a better business."
Nice £15,000 buy at 95p just reported, well above the published 93p offer price.
Yes surprised no TU for YE, but results should be out in April and should be well ahead of last year. As has been said if there was anything untoward it would have to be released.
Feels very undervalued at these levels - growing profits, lots of cash and now dividend paying. What's not to like?
TST have just announced this contract win with Eliquo Hydrok "for a technology rollout of the latest rugged tablets and handheld computing devices":
Https://www.touchstar.co.uk/blog/eliquo-win
Eliquo look quite a substantial operation - could be a reasonably sizeable win given all "depots throughout the country":
Https://www.eliquohydrok.co.uk/en/about-us.html
"ELIQUO HYDROK has extensive experience and track record of working with all the major Water Utility companies throughout the UK and Eire. Head office and main manufacturing base is located in Cornwall, with additional satellite 'service and installation' depots throughout the country in the areas where we operate."
Noted what you say but the company issued a January Trading Update in 2021, 2022 & 2023 and maybe before then too (I haven't checked). So it does seem a bit strange that nothing has been released this year. Hopefully no news is good news.
Rugged mobile computing contract win:
Https://www.touchstar.co.uk/blog/damart-case-study
There's been no year end trading update as yet - remember TST would be obliged to issue a trading statement if they were materially ahead of (or behind) expectations.
As they haven't we should be able to assume that TST traded in line with expectations for last year.
I would rather TST had formally issued an RNS confirming this. But many companies don't, and I know some brokers are stupidly obstinate in sticking strictly to the rules and not considering the likes of us as shareholders.
As a reminder, the expectations are:
- 6.7p historic EPS for 2023, rising to 8.7p EPS for this year
- a maiden 1p dividend rising to 2p this year
- a £3.3m cash pile at 31st December, rising to £3.4m at the end of this year, aginst an £8.2m m/cap, i.e 40% of the m/cap
Assuming I'm correct TST remain extremely undervalued imo on those metrics.