Paul Scott Stockopedia comments. - VLX7 Aug 2023 12:36
There was never any serious doubt about this - management indicated previously that competition authorities approval was a formality. However, as the acquisition of Murat Ticaret (based mainly in Turkey) is a significant-sized deal (described as “transformational” in today’s RNS), it’s reassuring to have confirmation that the deal can go ahead, expected to complete at the end of August.
Look at how the growth story at Volex is developing - impressive I'd say, especially as it's continuing to do well, despite tough macro at present -
Paul’s opinion - clearly the acquisitions strategy is adding value, as the EPS has dramatically improved over the years, so I don’t mind the associated dilution from part-funding acquisitions with placings.
As a refresher, I reviewed the most recent trading update here on 27 July 2023, which said trading is in line with expectations, accompanied with a confident-sounding outlook.
Volex strikes me as an excellent GARP share - really a growth business, from reasonably-priced acquisitions, executing very well, yet on a value share rating. That’s an opportunity to me, and for full disclosure I should say that I increased my personal position size after the last, reassuring update.
Many of us are traditionally sceptical about groups which grow by acquisition. However, when executed well, it can be one of the best methods of creating a multibagger - as Judges Scientific (LON:JDG) and others have shown. The lustre has come off SDI (LON:SDI) recently, but it’s still got a great long-term track record of value creation through sensible acquisitions. This type of share can attract a high PER in a bull market, so I see Volex as a potential double gainer from increased earnings, more acquisitions, and probably a higher PER multiple in the next bull market, whenever that occurs.
A 3-bagger over 5-years, and that’s fully supported by EPS growth of a similar percentage - chart also looking quite nice now (looks like it's formed a base, and now above the 200-day MA) - start of another bull run perhaps?
https://app.stockopedia.com/content/small-cap-value-report-mon-7-aug-2023-card-vlx-ctg-ckn-973254?order=createdAt&sort=desc&mode=threaded
subscription only hence full printout
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