RE: Excellent results - P/E is only 7.617 Apr 2024 22:47
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."