REAT newly tipped on Master Investor13 Feb 2024 07:26
Https://masterinvestor.co.uk/equities/react-group-ready-to-clean-up/
Extracts:
"REACT Group Ready To Clean Up
By Mark Watson-Mitchell 12 February 2024
A Cash-Positive business and operating on 87% ARR"
"I know that I haven’t featured my favourite ARR investment criteria for any stocks recently, but as regular readers will know I just love Annual Recurring Revenues.
It is any finance director’s key number and this group operates on a very high figure.
To know that your company’s revenue intake has certain fixed levels for the year ahead, surely makes the assessment of future capital expenditure that much easier.
So, when I alight upon companies where their business has high levels of guarantee going forward, it makes me almost salivate upon the assumption that ‘risk’ is being severely reduced."
Conclusion:
"Analyst Views
Greg Poulton at Singer Capital markets rates the group’s shares as a Buy.
For the current year to end September he is estimating £21.2m of revenues and £2.1m of adjusted pre-tax profits.
He has a Price Objective out on the shares at 1.9p.
In the middle of January, the group appointed Dowgate Capital as a Joint Broker to the company, I now understand that it will be issuing a note on the group shortly.
My View – 1.60p Target Price Holds Firm
This little group has achieved excellent organic growth over the last three years, running at an average 24% per annum rate in that time.
And that long-term growth in its 87% annual recurring revenue will also help to boost still further its operating margins.
I consider that this little group has sensible ambitions in its future expansion.
It has a declared aim to grow to a £50m value within the next few years.
Against its £13.5m market capitalisation, a positive point is that it ended its 2023 year with £2.1m cash in the bank.
The recent bolt-on acquisitions that it has completed have all been accretive and I am sure that other smaller to medium sized targets are being lined up, certainly as the group steps up its M&A expansion phase.
The group has a good pipeline of potential business and as it gets its digitisation completed, I can envisage even more cross-selling opportunities being presented and being worked upon.
It would be sensible if moves were made to lose the current ‘penny share’ status, that could give it more investor credibility – which it certainly deserves.
The group’s shares, which closed at just 1.25p on Friday night, are a Strong Hold for existing shareholders and should prove to be a bargain for new investors."
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