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|21/10/2016 07:11:08||London Stock Exchange||Re CMA Review - Investigation Now Closed|
|07/10/2016 15:10:03||London Stock Exchange||Holding(s) in Company|
|26/09/2016 18:22:03||London Stock Exchange||Holding(s) in Company|
|26/09/2016 16:40:47||London Stock Exchange||Second Price Monitoring Extn|
|26/09/2016 16:35:38||London Stock Exchange||Price Monitoring Extension|
|21/09/2016 07:00:14||London Stock Exchange||Board Appointment|
|21/09/2016 07:00:09||London Stock Exchange||Preliminary Results|
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Research reports on DX GROUP PLC
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Positive conclusion to the CMA investigation
21 Oct 16
DX has confirmed that the UK Competition and Market Authority’s (CMA) review in to the acquisition of The Legal Post (Scotland) Limited and First Post Limited is now closed and no further action will be taken. This follows the announcement on the 16th September that the Initial Enforcement Order, put in place on the announcement of the investigation (5th July), had been revoked. The announcement had been perceived as a precursor to today’s positive conclusion and DX had already resumed integration of the acquired assets. Confirmation that no further action will be taken draws a line under the process. Forecasts remain unchanged as the positive impact to FY17 and FY18 numbers had been factored into estimates at the time of the initial acquisition announcement in May and were not changed on the announcement of the CMA investigation. DX potentially offers deep value trading on sub 4x PER, on current year earnings, and yielding 13% with just c. £6m net debt forecast for FY17.
Deutsche Post DHL to acquire UK Mail for a 43% premium
28 Sep 16
UK Mail has announced a recommended cash offer by Deutsche Post valuing the business at c. £243m equating to 440p a share. This is a 43% premium to last night’s closing price of 307.5p and a 43.2% premium to the weighted average price over the previous three months. The offer assumes UK Mail shareholders will receive the interim dividend of 5.5p. Deutsche Post DHL has received irrevocable undertakings of c. 60% from shareholders and UK Mail management. On current year consensus UK Mail forecasts, the 440p offer price equates to a PER of c.20x earnings and c.10x EV/EBITDA. This compares with Deutsche Post trading on c. 13.5x PER and 7.7x EV/EBITDA
FY16 results: Difficult year but results in line
21 Sep 16
FY16 has been a difficult year for DX but FY results are in line with PBT forecasts and the company has confirmed it will pay a final dividend of 1.5p taking the FY total to 2.5p, an 11% yield. Revenue of £287.9m (£297.5m) was down 3.2% YoY and broadly in line with our expectations of £291.9m. PBT at £11.5m was significantly below last year, as expected, but in line with our £11.6m estimate and a lower tax rate than forecast meant earnings came in 4.7% above forecast at 4.9p. FY17 is shaping up to be an important year with several milestones that could improve the earnings visibility of the business. These include the announcement on the winner of the HMPO contract and developments on the new hub. The current valuation reflects the issues the business has faced during the year and concerns on the rate of decline at the Exchange business. The FY17 PER is 4.5x and, assuming a flat dividend of 2.5p, the shares yield c. 11% on a balance sheet with just 0.5x EBITDA of gearing.
Positive update from the CMA
16 Sep 16
DX has announced an update from the UK Competition and market Authority’s (CMA) review in to the acquisition of The Legal Post (Scotland) Limited and First Post Limited. The Company announced the acquisition on the 10th May, this was followed with the CMA announcing that it would review the deal on the 5th July, at that time the CMA put in place an Enforcement Order. Whilst the review is on-going and a final decision has yet to be made, the CMA has revoked the Initial Enforcement Order based on evidence it has received to date. We view this announcement positively as it allows DX to continue with the integration of the acquired assets with the company’s existing operations in Scotland. There is no change to forecasts on today’s announcement as the impact of the acquisition had been factored into numbers when initially announced back in May. FY16 results are expected later this month and a trading update (8th June) confirmed that they will be in line with expectations. Current consensus expectations for EBITDA range from c. £18m to £19.0m and an outcome between this range would be reassuring taking into account the difficulties faced during the year.
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Fighting the waves
25 Oct 16
Management action in response to a tough trading climate and falling profits should contribute to a sound recovery in profits next year. Following share price weakness, the group is valued at a substantial discount to both the broking market leader Clarkson and to other peers. Meanwhile, if the dividend can be held, the shares offer a well above-average yield, pending an eventual improvement in trading conditions.
21 Oct 16
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FY17 expectations unchanged. Interim dividend maintained
25 Oct 16
Interims reflect tough markets which impacted Technical. Shipbroking delivered a resilient result and Logistics has performed well. The interim dividend has been held at 9.0p. The group anticipate an improvement in H2. The Board’s expectations for the year are unchanged based upon the strength of the order book due in H2, its ongoing market coverage and the benefits of action taken previously. We have retained our FY2017 PBT forecast of £8.7m and a maintained dividend. We reiterate our Buy and adjust our TP to 450p.
Doing things differently
25 Oct 16
Growing pains have impacted on its operational performance (EBIT margins 5.8% FY15 vs 12.2% FY13) and the HSS Hire valuation is at distressed levels (price to book 0.4x vs 1.3x at the time of the float). As the top-line catches up with the expanded cost base and the roll-out of the NDEC leads to greater efficiencies, margins and returns will rebound. Historical experience has shown that price to book ratios typically match these improvements (see Ashtead FY08-FY15, price to book expanded +196%). Therefore, we see scope for material upside in the share price as the expected operational recovery to progress. Our 12 month target of 115p equates to a 0.8x price to net operating assets
Risks discounted leaving significant upside
18 Oct 16
FY 2016 sales grew strongly at +22% but EPS growth lagged at +3% (our revised forecast -1%) as staff attrition and significant investment in new services held back profitability. Conversion of profit into cash improved significantly, at 240% in H2, as shorter payment terms and a lower level of extensions also benefited. We make no major changes to our forecasts and reiterate our view that Utilitywise is at the forefront of a changing energy market, supported by investment in innovative technology. The current valuation is entirely focused on the short-term challenges and ignores the growth potential supported by the new services.