RE: Tipped as Buy overnight by Simon Thompson in the IC13 Jan 2023 11:13
Here's the rest of the IC Buy tip (as posted elsewhere by SEV22):
"The agreements extend the group’s global reach and highlight the efforts management is making to maximise the value of its brands. This is important after shareholders suffered an annus horribilis in 2021 when profits reversed, a distribution agreement in China failed to deliver (leading to the appointment of a new partner), customers delayed orders and reduced inventory, and input cost pressures accentuated the hit to profits.
Although the group made progress last year – December’s trading update reiterated guidance that points to annual cash profit rising a third to £8.7mn on 25 per cent higher revenue of £41.3mn – investors have been taking a cautious stance given past disappointments.
Investment risk skewed to the upside
However, with 2021 complementary acquisitions performing well – BBI Healthcare, a market-leading women's health and diabetes/energy management company, and oncology support product company Helsinn – and three highly profitable ear-nose-throat brands (Earol, EarolSwim and Sterinase) acquired for £13mn at the tail end of 2022, then analysts at Cenkos Securities pushed through upgrades last month that suggest the group could deliver cash profit of £11.6mn on revenue of £50.4mn this year. On this basis, expect a third higher adjusted earnings per share (EPS) of 6p, implying the shares are rated on a modest price/earnings (PE) ratio of six.
Furthermore, estimated net debt (including leases) of £15.8mn could be paid down to £9.8mn by the end of 2023, thus transferring more of the economic value in the entity from debt to equity holders. These assumptions assume that Venture hits its revenue and profit targets which are based on a maintained gross margin of 42 per cent.
Rated on five times 2023 cash profit estimates to enterprise valuation, less than half the rating of peers, the investment risk remains skewed to the upside. So, having advised bottom fishing, at 28p, when I covered the half-year results (‘Nothing ventured, nothing gained’, 22 September 2022), I feel the shares, at 36p, are worth buying ahead of what should be a reassuringly positive pre-close trading update in late January or early February. Buy."
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