Barclays says Auction Technology cyclical risks overdone

(Alliance News) - Auction Technology Group PLC is a "hidden gem in plain sight", Barclays said on Tuesday, taking a positive view of the stock despite perceived recession risks.

The FTSE 250 constituent is a London-based auction platform technology for online marketplaces. It debuted on the London Stock Exchange in February of last year, pricing its initial public offering at 600 pence per share.

The stock has risen 36% since then and rose 9.5% to 817.63p each in London on Tuesday. It has a market capitalisation of GBP985.5 million.

It has been a solid stint from ATG as listed company so far, though Barclays noted sentiment towards the stock has taken a hit recently. Shares are down 46% year-to-date.

"The stock has taken a sentiment hit due to perceived risk around a recession and fiercer competition. We explore these in detail and conclude fears are overdone," analysts at Barclays commented.

Barclays began coverage of the stock with an 'overweight' rating.

"Cyclical fears seem overdone. Bears might see ATG's end-markets cooling. But peer data from 2008/09 suggest revenues are likely to hold up," Barclays added.

"We see 11% downside to our FY24e base-case EPS in a 2009-style recession. And, as ATG makes money via commissions, it's well hedged against higher inflation."

Following recent share price weakness, ATG now has an "attractive" valuation according to Barclays, trading at a discount to the wider classifieds sector.

Barclays said its earnings expectations for ATG are above consensus for financial 2022, 2023 and 2024. ATG ended its most recent financial year in late September.

The investment bank also noted that a stronger dollar offers ATG some "M&A firepower".

Analysts at Berenberg on Monday noted ATG generates 80% of its revenue from North America, so it is helped by a red-hot greenback.

Berenberg said: "We think that there are several reasons to buy, even in this environment. Firstly, ATG is primarily a USD earner; secondly, its peers have proven to outperform in recessionary periods; and, thirdly, the stock now trades on a 20% discount to its listed competitor Ritchie Bros (despite its faster growth and higher margins)."

Berenberg began coverage with the stock with a 'buy' rating.

By Eric Cunha; ericcunha@alliancenews.com

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