Paul Scott Stockopedia comments.18 Apr 2023 11:05
I'm impressed with FY 3/2023 TU from £vlx
H2 revenue actually dropped slightly from H1 (H1: $357.5m, H2 $352.5m) = $710m+ FY
However, margins rose (H1: 9.0%, H2: 9.6%) underlying operating profit margins.
Annoyingly, the update quotes a profit measure that is *not* quoted in the last Singers note (from Nov 2022). So we have to manually work it out, which I've done, as follows:
Underlying operating profit of $66m turns into u/l profit before tax of $60m (assuming the differences in H1 are unchanged in H2)
Assuming same tax charge %, then I estimate EPS as H1 actual: 14.4c, H2 est: 15.3c, FY 3/2023: 29.7c
Translate into sterling, gives 24.0p EPS (my estimate, based on today's TU)
With net debt strikingly lower than forecast at $76m (Singers last forecast was $102m) and only 1.0x EBITDA, nobody needs to worry about debt, and not much of an adjustment is needed for valuation purposes.
Outlook sounds perky.
How to value it? I can't see why we wouldn't apply a PER of say 12-14. That would give a valuation of 288p to 336p. So at just over 200p last night, this share looks significantly under-priced, and should logically be a 20-30% riser today, I reckon.
Complaints - why has Volex left it over 5 months from the last trading update? That's a yawning gap, and causes shareholders to worry. So it needs to introduce another trading update in between this too-long gap in future.
Why does the trading update quote underlying operating profit, which is a measure that Singers does not include in its forecasts? It needs to quote u/l PBT, and EPS in trading updates too.
Overall, this looks terrific, and VLX shareholders are going to be rewarded nicely for their loyalty, I reckon. Well done to holders!
Regards, Paul.
P.S. Singers note has just come through. They've estimated 27.4c for FY 3/2023, so a little lower than my guesswork above. Not sure what the reconciling items are - they're probably building in a little caution, so actuals beat slightly?
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