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Good to see only £7k of buys today causing a 1p rise and the bid price increase to 72p (the true closing price last night was 71.5p, disturbed by a late closing buy at 73.5p).
Hopefully indicates not much stock around to satisfy demand.
tipped as a buy on saturday (subscription-only):
https://*************.com/views/74216/react-group-first-half-growth-across-all-three-divisions-buy
"react group – first-half “growth across all three divisions”, buy
by hotstockrockets | saturday 27 april 2024
cleaning, hygiene, and decontamination group react (reat) has issued a trading update emphasising half-year ended 31st march 2024 “good sales growth across all three divisions of the business… adjusted ebitda of £1.3m up 38%”. how good is the news from a currently up to 72p offer price for the shares?
etc"
Currently online you can only buy a maximum 3k shares at 71.95p, whereas you can sell 15k shares at a big premium to the 71p bid at 71.55p. Encouraging.
I added more yesterday - can't see the share price being at present levels for long.
Singer Capital Markets have updated - they say Buy and have a 97p target price.
They forecast 6.76p EPS to this September, rising to 7.68p EPS and 8.61p EPS.
The £1m cash pile also rises to £2.6m and then £4.6m.
Since H1's EBITDA is already 53% of their forecasts, even before the recently RNS'd contract wins, it's highly likely imo that REAT will beat expectations this year.
Especially with over 85% recurring revenues and improving margins.
Singer conclude as follows:
"Contract win momentum continues The Company has continued its drive on new business, with three recently announced material contracts totalling over £1.3m of revenue p.a. In addition, it continues to be awarded numerous small and medium sized wins which highlights its cross-selling capability. The pipeline for the remainder of the year remains robust which provides the Board with confidence over full year expectations".
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."
Your team.
Hi Mark, Well done to you and you're team. Are you able to report PBT as well as adjusted EBITDA in the future (the latter being of little use to me)? Would really appreciate it. Thanks.
A terrific H1 trading update today, which strongly suggests that REAT will beat expectations for the year.
With H1 EBITDA up 36% year on year to £1.3m, REAT have already achieved 52% of the £2.5m consensus forecast, even without the substantial contract wins already announced this year.
Other highlights:
- recurring revenues remain above a huge 85%
- the cash pile is now up to £1.5m, against a £14.8m m/cap
- margins are increasing fast given revenues up 14% and EBITDA up 38%
No wonder there's "a high degree of confidence in achieving full year market expectations" - and much more imo.
On a current year ex-cash P/E easily in single figures REAT looks in great shape for a re-rating:
Https://uk.advfn.com/stock-market/london/react-REAT/share-news/React-Group-PLC-Trading-Update/93710572
The tone from the RNS is understated confidence. I like it.
Sales growth continuing to improve, following on from recent full year results. Revenues, gross profit and EBITDA all increased again. ATB
With comments elsewhere that there's no or very little stock available to buy online. Should be good for a lot more if there continues to be no stock around.
In the absence of 'contract win RNS is likely to be a Trading Statement RNS, the last week April, and after that, we can look forward to the Half Year Report, sometime in first week June. Positive RNS's on these subjects should see sp hit 80p
Interesting point about it not being a sexy tech stock. True, the optics maybe lack a bit of glamour, but cold hard cash profits will eventually turn eyes in this direction
Onward Opportunities Limited (ONWD) last week announced their annual results. They have a £1.2m stake in REAT, or 6% of their portfolio, and they had this to say (incidentally, the tip in the last post was from Share Prophets - asterisked out):
"With React we believe we have captured a defensive growth opportunity at a value price, and invested c.6% NAV into the company. It is a business the team have been researching since September 2022 (pre-launch) and was an early pipeline priority. Through a mix of specialist cleaning services for UK corporates, the business has a highly attractive earnings profile.
The business has three core divisions:
1. React - the heritage of the group, reactive specialist cleaning often needed for emergencies or callouts requiring specialist cleaning techniques; high margin but less predictable.
2. LaddersFree - large glass pane and cladding cleaning for UK corporates, executed through a capital-light membership model.
3. Fidelis - contract cleaning focused on public services. The business operates over 80% of its sales on contracted terms of one to five years and has been organically growing at 17%+ per annum for the past four years under a new management team. Sales are highly cash generative and yield a high contribution margin, whilst CAPEX, depreciation and amortisation are all insignificant.
Crucially now, as a result of a mix of organic and acquisitive growth and the upcoming cessation of deferred consideration payments, the business is beginning to generate strong profits and free cash flow growth from contribution margin as it exploits inherent operational gearing. If one were to look away for a moment - not knowing the company cleans large glass facades, rolling stock, and prisons - its characteristics mean it could easily be mistaken for a small, successful software company. Yet we have been able to acquire shares in React over the past six months on forward P/E multiples of 6.5x - 8.5x."
tipped with a 100p target following the recent contract wins:
https://*************.com/views/73973/react-group-contract-wins-including-three-material-contracts-a-trading-momentum-continuing-buy
conclusion:
"of course, the group now has to deliver on such ‘opportunities’ but they are noted to further underpin confidence in its current year performance. we’ve noted year ended 30th september 2023 ‘real’ profit around £1.6 million on revenue up to £19.6 million and forecasts for adjusted pre-tax profit to rise to above £2 million this year, with also a healthy balance sheet.
we, therefore, now further look forward to a further update on trading the group has stated it will provide next month and continue to consider a (50:1) shares consolidation-adjusted 100p+ share price, £21.5 million+ market cap, looks justifiable on the noted earnings and growth outlook. at up to 75p, still a buy."
Dowgate have initiated coverage of REAT today with a target price of 100p and a 25 page research note.
Good to see that they say the 100p target is "conservative" as it's based on only assuming the Group achieves c60% of its medium term cashflow target.
They forecast 6.9p EPS this year, with a closing £1m cash pile.
The year starting this October is forecast at 8.1p EPS with a £3.1m closing cash pile:
Https://dowgatecapital.co.uk/documents/
I'm back in after a relatively short hiatus. Like the use of 'material' in the RNS.
Yeah I sold for breakeven. Didn't have momentum I expected.
I wouldn't count on it :)
REAT is a great company and is heading in the right direction, but it flies under the radar of most PIs, so it's better suited for longer term investors.
Would like to see 75 today or tomorrow...
Took a small trade position this morning. lets see what happens
Excellent news this morning, with both material contract wins and contract renewals which now include significant additional services.
The headline is £1.3m of annual revenues, which I assume comprises the additional £500k per annum from the new FM agreement plus the new £500k from the UK Government agency, as well as the £295k per annum from the existing FM provider? Or are the new/potential revenues in addition the core values of the contracts?
Whichever, there's also "a stream of small and medium sized wins" in addition.
It all sounds extremely promising:
Https://uk.advfn.com/stock-market/london/react-REAT/share-news/React-Group-PLC-Contract-Wins/93602432
It is my experience that companies who have had a large consolidation (50:1) drift lower until a positive RNS is released. There will be some SH's who sell because they do not know there has been a consolidation, and are perplexed when their no of shares in account is only a fraction of what they believe it to be. !!!
The company fundamentals above has not recalculated no of shares in issue. The 'old' no is c1b, the new no should be about 22M. The MC, I believe is correct.
Share consolidation approved at AGM today so should open at 67.5p on Tuesday.
Singer Capital retain their Buy and 1.9p price target.
They forecast 0.136p EPS to this September, i.e a P/E of only 9.9, and summarise as follows - remember that we're already halfway through the financial year, so today's AGM statement should presage a good H1:
"A brief AGM Statement from React confirms that trading is on track, with momentum continuing into FY24. Revenue for the first five months of the year was ahead of the prior year and the Board is cautiously optimistic about the outlook. We therefore keep our forecasts unchanged and remain at Buy with a 1.9p TP, noting React’s defensiveness, high recurring revenues and attractive margin"