Discoverie Grp. Share Price (DSCV)

Massive.

https://www.proactiveinvestors.co.uk/companies/news/984808/discoverie-group-undervalued-as-it-proves-its-ability-to-press-on-through-headwinds-984808.html

https://www.proactiveinvestors.co.uk/companies/news/984812/discoverie-group-plc-expecting-to-make-significant-progress-on-an-organic-basis-984812.html

...from earlier this year...

discoverIE Group is a designer, manufacturer and supplier of innovative components for electronic applications. The Group has 2 main divisions – Design and Manufacturing (D&M) and Custom Supply. The former has transformed from a UK business at the beginning of the last decade to a full-blown global business across 24 countries, with more than a quarter of revenue generated outside of Europe. The Custom Supply is also operating internationally, with logistics centres in Germany, UK and Hong Kong. Most of the sales come from D&M. DSCV is providing solutions for 4 industries – Renewable energy, Transportation, Medical, and Industrial & Connectivity.
The blended approach towards growth with numerous acquisitions over the past 10 years has generated significant goodwill on the balance sheet of more than £100m (25% of total assets). During the last 12 months the company has acquired 5 businesses for initial consideration of £109m. The FY2021 results show no impairments, meaning prior to investing a good look in the subsidiaries is required. Growth is solid, with revenue and EPS CAGR at 9.57% and 3.69% respectively. The lower percentage on the EPS is primarily due to continuous dilution from issuance of shares over the past 10 years. ROCE was at 6.45% for FY21 and gearing is currently at 32.9%, which is on the higher end to what we would like to see. To balance it off, there was a good dividend payment of 10.2p for FY21. Valuation is average at best, with P/E and EV/EBITDA higher than the average of the sector (33 and 24.24 respectively).
Lates communication from the company is in the form of a trading update, which unfortunately gives us very little detail on the financials. The company is proud of its progress on reducing carbon emissions and new acquisitions profitability. Following the equity placing in September, they have managed to cut the gearing below their target range of 1.5-2.0 to 1.4x. The important line of the update is in the second paragraph, management is saying despite the headwinds “Group performance for the first half is ahead of Board’s expectations”. Brilliant! That’s what we like to hear. We will be keeping an eye on the stock as it may get an upgrade following continuous outperformance.

Projects: Newest acquisitions are Logic PD Inc (US based) and Antenova Limited (UK based).

Short analysis (FY21 from March while we wait for the Interim results):

Cash decreased for the 12-month period due to a big repayment of debt
Net debt decreased over the period
CA/CL = 1.7
Cash ratio = 0.27
Interest coverage = 5.17
P/S = 2.19
BV ps = 233p, growing at 8% CAGR
Operating profit of £20.7m, below 2020 figure
Gross profit margin 34%, slightly above the 2020 result...

...from WealthOracleAM

https://wealthoracle.co.uk/detailed-result-full/DSCV/201

Share price still falling despite good trading update