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Global legal business DWF (DWF) is offering ‘significant value’, according to Berenberg.
Analyst James Bayliss retained his ‘buy’ recommendation and target price of 160p on the stock, which gained 2.4% or 1.3p, to 55.2p on Wednesday.
He said the shares had underperformed despite posting a ‘reassuring’ full-year update last month and are down 33% year-to-date.
‘We struggle to understand the severity and direction of this reaction, noting management’s reiteration of its confidence in the future; its low balance sheet gearing; its exposure to annuity-like, defensive earnings; and its significant asset-backing through the group’s case book and working capital,’ Bayliss explained.
He said the shares are trading on ‘just 4.3 times full-year 2024 price/earnings, with a 12.1% dividend yield and a 16.6% free cash flow yield’, which was ‘substantially at odds with our expected double-digit earnings compound annual growth rate and story of margin improvement and deleveraging from here’.
He added that the current valuation implies ‘a high degree of unfounded concern about the delivery of future profitability and debt forecasts’.
https://citywire.com/wealth-manager/news/stock-talk-dechra-berkeley-dwf-lookers-halfords/a2419979
Reassuring FY update. WTF, no profit guidance, like they were hiding something?
Comments like - Highly confident in medium term guidance provided in July 2021, underpinned by the cost programme which is now expected to remove in excess of £15m of cost by end of FY24 made it all sound very desperate.
Searching round, Berenberg seem the only bull on this now, and for every bull there is a bear, like Liberum who rate it as a sell - One of them is very wrong, but which one?
We have liftoff!!
Commercial law firms do best when there is a vibrant economy (unless they are hedged by strong litigation/insolvency practices). Firms heavy in real estate may be particularly vulnerable if that market slows down (commercial property is in the doldrums for structural reasons). That said, it's easy to identify risks, but the tricky bit is assessing how much of that negativity is priced in already....?
Well a month on from the trading statement no sign of a placing. With the exception of that note from Liberum everyone seems to be scratching their head about the drop. There does seem to be some nervousness around the final dividend to be declared next month , which should be around 3.5p, however this is only around £12m in cash flow to be paid in October, plenty of time to improve the thin cash buffer. Saw this note the other day which is a very good summary of the company and the situation
https://masterinvestor.co.uk/equities/dwf-group-mega-cheap-on-a-10-86-yield-and-5-43-p-e/amp/
"My View – Possibly One Of The Cheapest Quality Stocks that I have seen for quite a while"
Nice gap up, some chunky buys and no sells, upward pressure is strong on this now, looking very positive
Spread looking better at the moment. Hopefully we will break 70p...
Given the blood bath and sea of red elsewhere in the market today, ftse down almost 3%, this is actually a great day only losing a fraction and maintaining recent gains. really promising