Singet Capital initiate: Buy with 2.5p target price31 May 2022 11:18
Per Singer Capital's new note, they have initiated coverage as a Buy with a 2.5p target price.
They forecast 0.14p adjusted fully diluted EPS to this September, rising to 0.16p EPS next year.
Basic EPS is forecast at 0.16p EPS, rising to 0.17p EPS.
They summarise:
"Shares attractively valued
React is trading on a Sep. ’23 P/E rating of only 6.5x or 4.2x EV/EBITDA, which we believe substantially undervalues the Group. We target a 15x P/E multiple, which implies a target price of 2.5p. Given the M&A strategy and opportunities to grow LaddersFree ahead of our forecasts, we see scope for the price to exceed this level over time."
And:
"React is a leading specialist commercial cleaning, hygiene, and decontamination company. We believe it is well placed to build scale in terms of both its earnings and market cap. The business has a highly attractive proposition – largely non-discretionary, specialist services, a high proportion of recurring revenues (FY23E: 80%), attractive and improving margin profile (FY23E operating margin of 12%), and a capital light model (low working capital and capex requirements). It has a clear strategy to deliver double digit organic growth, alongside selective, earnings enhancing M&A.
The most recent acquisition of LaddersFree is transformational and offers potential for significant earnings growth beyond its current, consistent run rate. Against this backdrop, we view a Dec. ’23 P/E rating of 6.5x as very undemanding. We believe the share price is well placed to outperform, driven by both strong earnings growth and re-rating potential as the business scales. We initiate with a Buy recommendation and 2.5p target price."
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