RE: Excellent H1 update - looks good for beating forecasts25 Apr 2024 09:35
Dowgate Capital have retained their Buy and 100p price target.
They forecast 6.9p EPS to this September,rising to 8.1p EPS and then 9.0p EPS, though they state that even these are based on conservative assumptions.
The £1m cash pile at September rises to £3.1m and then £5.1m. Though it's likely that there'll be more earnings-enhancing acquisitions by then.
In summary:
"Positive 1H momentum shines through.
React Group has released a positive update that has confirmed that the strong 2H 2023A momentum has continued into 1H 2024E, with what was described as a ‘record trading performance’. The Board has reported good sales growth in all three divisions of the business, with the statement commenting that the Board has ‘a high degree of confidence in achieving full year market expectations.’ We have left our FY 2024E forecasts unchanged at this point. These assume FY +9% revenue growth, but in our view, there could be an accent on the upside as the year progresses, following 1H revenue growth of +14%, and contract wins that should benefit 2H and next year. We retain our Buy stance with a Target Price of 100p. This still conservatively assumes the Group achieves c60% of its medium term cashflow target, and we reiterate again, it also does not include any potential value enhancement from deploying the Group’s firepower on acquisitions."
"We retain our Buy stance with a 100p TP. We value React Group using the EVA®/MVA valuation method. This derives a share price of 100p assuming only c60% of the medium-term goal of £5m p.a. of free cashflow generation is met. It could outperform that, and we highlighted in our 9 April initiation research, that we believe the Group has firepower to enhance."