There was another very positive update from G4M yesterday, which saw the shares subsequently rally, only to ease off a bit this morning as I write.
Although the news came largely out of the blue, I can’t say I was completely surprised, given the ongoing mood music that has been emanating out of the company in recent months and I’m happy to say I did my bit for the cause last week when I punted the stock in the virtual Stock Slam event. (https://www.piworld.co.uk/2021/02/19/stockopedia-piworld-virtual-stockslam-february-2021-with-damian-cannon/)
As things stand following the release yesterday, the shares now sit on a PER of 15 given the upgraded EPS figure from broker N+1 Singer of 51.5p, which looks excellent value, particularly when comparing with peers.
The performance over the last year has been nothing short of outstanding and it scores on a number of fronts, where as an operationally geared business, cash generation is becoming marked with expectations for a full year 2021 net cash position of £1.8m.
The company now expects that EBITDA will be no less than £18.2m, up from the last raised guidance of £16.7m, leading to a profit and EPS upgrade of some 15%.
Singer now expects adjusted pre-tax profits of £13.1m on revenue at £157m as the progress across the business has continued to build momentum, with notable progress in Europe.
The performance so far in the final quarter has been very positive, with margins importantly remaining strong and with costs well under control. Even the potential post Brexit issues which could have caused some teething issues appear to have been handled very well on the logistics front, with the previously established hubs in Europe assisting.
As I have mentioned here before, the numbers from Singer pencilled in for 2022 are somewhat out of date and the broker will revisit these in April once there is some visibility for the new financial year.
Clearly, the pandemic has assisted the business substantially and driven much of the upgrades along the way in what has been a transformational year for the business.
That said, even when restrictions eased last summer the trend that G4M had benefited from remained strong, whilst the absence of selling products into the live music events space which was badly hit now surely needs to be factored into the forward picture.
Whilst the numbers achieved in full year 2021 are unlikely to be achieved next year, the company may yet perform more strongly than the current share price suggests, or numbers currently out in the market point to.
G4M is in a great spot, has sorted out its margin issues and sounds confident on retaining the recently improved levels which have continued to head northwards.
Additionally, ahead there is likely to be some pent up demand across the live events products space which could enjoy a real and marked bounce.
The assumption that many shoppers in the musical space will go back to the local store on the High St, could also prove wide of the mark and G4M will no doubt be doing all it can to retain these newly won customers.
Despite Singer currently sitting on the fence for the approaching financial year, Progressive does have some more recent forecasts pencilled in, but even these look conservative given where G4M is at right now. This sees it anticipating EBITDA at £11.6m, adjusted pre-tax profit of £6.7m and EPS of 26.4p.
That would see the stock on a more punchy rating with a PER of 30 at the current price, which is more in line with peers and where it is fair to say that would suggest the shares are now priced fairly.
However, given the continued progress and a gradual easing out of lockdown, not just here but across Europe and ROW territories then these numbers could well prove very much on the light side and with margins now up at 29% plus, then risk on the forecast numbers appears to be skewed to the upside for me.
Within this, there is also the now clear element of strong cash generation and the Progressive numbers without being upgraded suggest net cash hitting £6.3m in full year 2022, rising to a significant £11m in the following year, which is a sharp reversal from being in the net debt position that existed.
It is also worth keeping an eye out for news on the launch of a second hand offering from the company which would enjoy strong margins more akin to its own brand sales.
Although this isn’t scheduled for launch until next year and I have little detail as yet, it is another string to the bow which could provide for a further strong and welcome revenue stream that adds more to the story and provides for the longer term attractions.
I should be catching up with management again come the results and will add more comment then, but for now I’m happy to continue holding and even adding at or around current levels.