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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.
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.
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).