Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
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Buying at 450p now.
Great to see Charles Stanley buying and going above 5% with 4.18m shares:
Https://www.investegate.co.uk/discoverie-group-plc--dscv-/rns/holding-s--in-company/201905031448090786Y/
Here's extracts from Finncap's summary.
They currently go for 29.2p EPS and a 10.1p dividend for the current year, but EPS forecasts may be increased as there's capacity for more acquisitions, and trading is of course going well:
"Prospects enhanced, debt reduced, target raised
On 16 April, discoverIE raised £29m equity to acquire two custom design and manufacturing businesses for an initial £15.9m, with the remainder to be used to
reduce gearing. The acquisitions offer complementary products that build on the group’s existing magnetics and sensor products, expand the geographic footprint
(with 80% of acquired sales in the US), further improve margins and strengthen
organic opportunities in target markets. Coupled with confirmation that Q4 trading
remained strong, we view this as another step forward along discoverIE’s proven
growth strategy."
"Target price upgraded to 535p from 488p. discoverIE continues to prove its strategy and the potential in its chosen growth markets. Coupled with the reduced financial risk post the equity raise, we now believe a valuation in line with peers Diploma, Trifast and XP Power is appropriate. This equates to a calendar 2020 P/E of 17.8x and a 535p target."
Nice - Finncap have today increased their target price to 535p (from 488p).
Very good coverage of the excellent results, with an interview with the CEO and this analysis from Peel Hunt:
Https://www.proactiveinvestors.co.uk/companies/news/219036/discoverie-pursuing-robust-and-well-executed-strategy-as-proven-by-recent-deals-and-solid-underlying-trading-219036.html
"Blue Sky:
Analysts at ‘house’ broker Peel Hunt said it sees the recent deals and solid underlying trading as “further proof of a robust and well executed strategy”.
They pointed out that the two April acquisitions are both “perfectly in line with the Group strategy and very comfortable fits”.
After the placing and purchases, the analysts estimates that the group will still have around £30mmln of firepower for further deals.
They pointed out that due to dilution from the placing, its earnings per share forecast for full-year 2020 remains unchanged, but their pre-tax profit estimates was increased by 9% to £31.2mln.
Peel Hunt has a 500p target price on, with the shares trading at 436p each, having gained over 23% in the year to date, giving the firm a market cap of around £347mln."
Peel Hunt today reiterate their Buy and 500p target:
Http://investing.thisismoney.co.uk/broker-views/
Good to see the directors participating and buying £72,000 of stock in the placing:
Https://www.investegate.co.uk/discoverie-group-plc--dscv-/rns/director-pdmr-shareholding/201904181157266551W/
Looks like more acquisitions are on the way:
Http://www.cityam.com/276368/electronics-manufacturer-discoverie-looks-break-into-us
" Tuesday 16 April 2019 3:55pm
Electronics manufacturer Discoverie looks to break into US market with acquisition
London listed electronics manufacturer Discoverie has made its first move into the United States with the £14.8m buyout of US parts maker Hobart.
The parts supplier for electronic devices announced the acquisition alongside the buy of another firm in the UK, as well as a £29m fundraising round via a share placing.
Discoverie makes parts for renewable energy, transportation, medical equipment and industrial wireless connections. Hobart makes custom transformers, inductors and magnetic components.
The acquisition marks the small cap listed firm’s first inroads into the US market. Discoverie chief executive Nick Jefferies told City A.M.: “They have a customer base that is almost entirely in the USA. That brings us revenue and opportunity to sell more in the US market.
“Allied to that, they have manufacturing in Mexico, which enables us to make products on the continent in the Americas rather than making it in India or China which we currently do, and shipping it all around the world. It makes a more efficient supply chain for us.”
Jefferies added the £29m placing would help fund future acquisitions. He said: “We’re looking for more businesses that are based in central western Europe, but increasingly in North America, that design niche, custom electronic components that can be sold into growth applications which are used worldwide. So watch this space.”
Finncap retain their 488p valuation.
They haven't yet included today's acquisitions in their forecasts, but state:
"With prospects enhanced by these acquisitions and debt reducing, the risk/reward has
further improved and we expect the valuation discount (me - to sector peers) to close."
With current year forecasts at 29.2p EPS, with a 10.1p dividend, DSCV looks pretty good value at current levels.
The year end update has been brought forward due to today's acquisition news.....
Excellent trading update, summed up by:
"Trading in the fourth quarter continued strongly and the Group expects to deliver full year earnings in line with the Board's expectations."
Plus good cash generation with better than expected debt.
And we have an institutional placing at 400p to help with two more nicely profitable acquisitions. A very good price considering where the share price fell to only recently. And I suspect the acquisitions will be earnings-enhancing more quickly than next year given the various synergies which DSCV have already proved they can achieve.
To give the Mail credit, they caught on to the transformation here faster than most. Nice summary and tip. Here's the conclusion:
https://www.thisismoney.co.uk/money/investing/article-6686469/MIDAS-SHARE-TIPS-UPDATE-Electronics-firm-DiscoverIE-tipped-plugs-profit-rise-75.html
"Customers include multinationals such as Siemens, Rolls-Royce and Airbus, as well as hundreds of smaller companies.
No single client accounts for more than 4 per cent of turnover – which again makes DiscoverIE a more robust business than it was before.
The company has grown both organically and through a series of acquisitions.
Jefferies has bought 13 businesses in the past decade and now aims to buy about two a year, always looking for high quality, well managed firms producing niche electronic components.
Brokers expect a 10 per cent increase in turnover to £428million for the year to March 31, 2019, with profits rising 27 per cent to £27.7million. A dividend of 9.5p is pencilled in, up from 9p last year.
Midas verdict: DiscoverIE has soared in value during Jefferies’ stewardship and investors have benefited. But there should be more to come. At £4.07, the shares remain attractive."
New report from Edison (which fails to emphasise that further earnings-enhancing acquisitions are likely):
Https://www.edisoninvestmentresearch.com/research/report/discoverie-group427953/preview/
"Valuation: Strong trading supports upside
For FY19e, the stock is trading on an EV/EBITDA of 9.6x (at an 11% discount to its peer group) and at a 2% discount on a P/E basis. With continuing growth and higher margins, further progress in increasing the weighting of business towards D&M (including accretive acquisitions), combined with good control over the profitability of the CS business, should help to close the valuation gap further. The stock is also supported by a dividend yield of more than 2%."
Peel Hunt have today reiterated their Buy and 500p target, whilst Finncap have a 488p target.
Looking very strong.
Trading is nicely in line, order books are at record highs, acquisitions are performing well, cross-selling is increasing fast and margins are firm.
The share price should climb on today's news, and the more that the market recognises DSCV's consistency and transformation, the higher the rating will go.
Good coverage and analyst comment here, with Peel Hunt setting a 500p target:
https: //www.proactiveinvestors.co.uk/companies/news/210449/discoverie-surges-as-it-hikes-interim-dividend-amid-first-half-profits-rise-210449.html
Extracts:
"discoverIE surges as it hikes interim dividend amid first half profits rise
10:10 04 Dec 2018
The customised electronics maker reported an underlying pre-tax profit of £12.9mln, up 24% on the same period a year ago, while revenues climbed 12% to £211.7mln"
" Looking ahead, the group said it had a “record breaking” period end order book of £131mln, up 18% YOY at constant exchange rates.
Jefferies said trading in the second half had “started well with further strong growth” and the company was on track to deliver earning in line with expectations.
READ: discoverIE Group makes bolt-on acquisition
He added that with the acquisition of human-to-machine interface products maker Cursor Controls after period-end, the company was “well positioned for continued growth” with further acquisition opportunities developing.
discoverIE purchased Cursor Controls for £19mln in cash upfront at the start of October, in a move that was expected to provide an immediate boost to the company’s underlying earnings and underlying operating margin.
Results demonstrate success of strategy, says broker
In a note to clients, analysts at City broker Peel Hunt retained their ‘Buy’ rating on the stock with a 500p price target, saying that the results demonstrated the success of the firm’s strategy as progress was made across all of its key performance indicators (KPIs).
“The growth in new design wins and order book (+18% underlying) give us confidence in the strength of the end markets” the broker said, adding that they also expected a boost from inorganic growth.
“Importantly, we are seeing the momentum continue into H2, driven in particular by the strategic focus on the four target markets of Renewable Energy, Transportation, Medical and Industrial Connectivity”.
For the full fiscal year, Peel Hunt is estimating an EBITDA of £34.7mln, up from £29.4mln last year, and a dividend yield of 2.8% compared to 2.6% last year eventually rising to 3.1% by the end of 2021."
Good mention in today's market report in the Times:
Https://www.thetimes.co.uk/edition/business/short-attention-span-is-bad-news-for-newcomers-5rmvkmqnm
"Among smaller companies, shares in Discoverie, which designs, makes and supplies components for electronic applications, rose 7.7 per cent after it announced the £19 million acquisition of Cursor Controls, a specialist designer and manufacturer of human-to-machine interfaces, such as touchpads used in medical, industrial and transport sectors. Numis issued an “add” rating and upgraded its pre-tax profit and earnings per share forecasts for 2020 to 2021 by 4 per cent, saying that the deal was “highly complementary to Discoverie’s existing design and manufacturing operations.” Discoverie shares rose 29p to 406p."
Nicely up today - a delayed reaction to yesterday's good news no doubt.
Finncap have reiterated their 488p target:
Http://investing.thisismoney.co.uk/broker-views/
And Peel Hunt have retained their Buy and 500p target
Excellent news - a new immediately earnings-enhancing acquisition. The core £19m buys £2.1m underlying profit (before exceptionals etc), so pretty good value.
This also expands the high-margin D&M division and has potential for cross-selling too:
Https://www.investegate.co.uk/discoverie-group-plc--dscv-/rns/acquisition/201810170700053044E/
"Cursor Control's products, which comprise trackballs, touchpads and ruggedised keyboards, are custom designed for specific applications, and are highly complementary to the Group's existing business. The acquisition is consistent with discoverIE's strategic focus on structural growth markets with over 60% of its revenues derived from medical and industrial sectors. Over 90% of its sales are to international markets, with 40% being into America, Asia and other non-EU markets. The business, which is based in Newark, UK, with manufacturing facilities in the UK and Belgium, will operate within the Group's Design & Manufacturing division whilst retaining its distinct brand identity."
Berenberg say Buy and have a 525p target.
Peel Hunt say Buy and have a 500p target.
Finncap retain their 480p target:
Http://investing.thisismoney.co.uk/broker-views/
When the market lifts out of its funk DSCV will hopefully recover quickly given the confidence, prospects and upside.
As encouraging an H1 trading update as you could hope for:
- "strong" Q2 trading
- comfortably in line with expectations
- order books up 18% year on year
- higher margin D&M sales up 21%
And strong hints of action to come:
"With a clear organic growth strategy and an active pipeline of acquisition opportunities, the Board expects to make further progress throughout the year".
Can't ask for more.
The share price has fallen back to bargain levels imo after a lovely, sustained rise. Probably just a seller out there in a relatively illiquid stock and a quiet summer.
DSCV should recover nicely with the H1 trading update due in only 4-5 weeks, especially given the excellent Q1 trading update.
Meanwhile, news of another new partnership:
Http://www.acalbfi.com/uk/articles/articlesContentPage/Acal-BFi-Advanced-Energy-partnership/NA-000792
"Acal BFi in new pan-European partnership with Advanced Energy
Acal BFi in new strategic pan-European partnership with Advanced EnergyAcal BFi have further enhanced their power portfolio to include high-voltage solutions in a new strategic partnership with Advanced Energy. The new agreement between the two technology leaders provides customers across Europe with access to Advanced Energy's (AE) full portfolio – including the high-voltage UltraVolt and HiTek Power product lines – with direct customer technical support from our expert engineers.
AE and Acal BFi sought to partner following their successful partnerships with Excelsys and Trek, which were both recently acquired by AE. The extended agreement provides customers with immediate access to all current and future product lines and brands in the newly extended group.
Access to wide range of products from UltraVolt and HiTek Power
The vast portfolio features 55 separate platforms and 1,500 standard, modified and custom high-voltage solutions. AE's UltraVolt and HiTek Power product lines are inherently flexible, with thousands of variations covering an exceptionally wide operating range of input/outputs from 100V to 500kV and 1W to 100kW. AE's solutions are proven to be highly reliable and deliver excellent power quality, with more than 450 applications in more than 80 markets worldwide currently using an AE high-voltage solution.
Access to technical, design and integration support from Acal BFi
By joining the Acal BFi power portfolio, more European customers can now benefit from AE's leading solutions with the direct technical, design and integration support of Acal BFi experts. With in-house capabilities to modify, customise and configure power supplies, solutions can be tailored to exact customer requirements, while also opening up the technology to more applications than ever before."
Good stuff - Berenberg have increased their target price to 525p (from 460p):
Http://investing.thisismoney.co.uk/broker-views/
Following a solid right hook I've just taken a mandatory 8 count... ie house purchase necessitated coming out for a month or 4.... but I'm looking forward to getting back in here when the finances sort out. Dv!
Appreciate the ongoing info, Rivaldo. :)
New Edison report just out - supports a share price of around 500p or so given the hefty discount to peers which is no longer warranted given the shift to high-margin, own-designed products:
Https://www.edisoninvestmentresearch.com/research/report/discoverie-group88346/preview/
Extracts:
"Outlook and estimates unchanged
In Q119, group orders increased by 16% CER and 7% organically. The group order book increased by 20% CER/13% organically y-o-y to £135m at the end of Q119, with c 80% due for delivery in the next 12 months. Management anticipates that it is on track to deliver earnings in line with its expectations; we make no change to
forecasts. The company noted that it has an active pipeline of acquisition
opportunities.
Valuation: Growing D&M business drives upside
The stock is trading on a P/E of 17.0x for FY19e, at a 13% discount to its peer group average. With continuing growth and higher margins, further progress in increasing the weighting of business towards D&M (including accretive acquisitions), combined with good control over the profitability of the CS business should help to close the valuation gap further. The stock is also supported by a dividend yield of more than 2%."
Nice coverage and analyst comment here:
http ://www.proactiveinvestors.co.uk/companies/news/201613/discoverie-makes-a-strong-start-to-the-financial-year-201613.html
Extract:
"discoverIE makes a strong start to the financial year
11:43 26 Jul 2018
The maker and supplier of customised electronics ended the quarter with a record order book of £135mln"
" Broker upbeat
The shares, up just under £1 in the last year, were trading sideways at £4.24. Broker Peel Hunt reckons the stock is worth £5 and rates it ‘buy’.
It expects 2019 sales to be £428.1mln, up from £387.9mln, while adjusted pre-tax profit is expected to be £25.7mln, 17% ahead of the year-earlier number.
“The outlook is solid, with management confident of further progress,” said Peel Hunt analyst Henry Carver in a note to analysts.
“This is underpinned by the strength of the orderbook – not just the percentage increase, but the concentration of high quality design wins in the key target markets. Our forecasts, which are in line with consensus, remain unchanged.”