Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on DX (GROUP) PLC. We currently have 22 research reports from 3 professional analysts.
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Research reports on
DX (GROUP) PLC
DX (GROUP) PLC
Mix impact of new business wins leads to downgrades and dividend cut
07 Feb 17
DX has announced that tough trading, cost and pricing pressures will significantly impact FY17 profitability. As a consequence, EBITDA is cut by 53% to £9.0m (previously £19.0m) leading to earnings declining 84%. As a result, the business has suspended the dividend, forecasts had previously assumed 2.5p in each year of the forecast period. Net debt increases to c. £21.0m from £5.7m previously. Today’s warning is particularly disappointing coming shortly after the announcement that DX had won the retendering of the HMPO contract. On FY18 earnings, which factor in a degree of recovery in profitability, DX is trading on 10.8x.
Successful HMPO tender improves forecast certainty
22 Nov 16
DX has confirmed that it has won the retendering of the HMPO contract. We understand that it was a highly competitive process so retaining the contract is especially pleasing and provides greater confidence looking forward. We leave forecasts unchanged but with materially increased certainty on being achieved. The successful retender highlights that the quality of service DX has delivered over the previous contract periods has been respected. The only disappointment in today’s statement is the announcement that the decision on the resubmission of planning permission for the central hub has been delayed until mid-February. Today’s announcement de-risks FY17 and FY18 earnings and net debt forecasts and highlights the attractiveness of the prospective 2.5p dividend in each year. We leave forecasts unchanged meaning DX is trading on just 3.6x FY17 earnings and yielding c.14% on last night’s 17.75p closing price. A conservative 7x short term recovery multiple would equate to a 35p share price offering 97% upside, this would still only equate to 4.0x EV/EBITDA.
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.
20 Feb 17
Hayward Tyler Group* (HAYT): Trading update and financial position (CORP) | Petra Diamonds (PDL): Interim results (BUY) | Gemfields* (GEM): Interim results (CORP) | Premaitha Health* (NIPT): Middle East momentum (CORP) | Sound Energy (SOU): Acquisition update and TE-8 well spud (HOLD) | Proactis* (PHD): Interim trading on track (CORP) | 7digital* (7DIG): Automotive contract win (CORP)
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
N+1 Singer - Small-cap quantitative research - New quality style screen + 11 quality focus stocks
09 Feb 17
We introduce our fourth and final style screen representing “quality”. This screens for stocks with the best combination of high returns on capital/equity, EBIT margins and operating cash-flow conversion rates. These criteria should help us monitor how strong underlying returns translate into share price performance over time and under varying market conditions. The screen selects the “best” 25 stocks from our universe of just over 500 stocks and, as usual, we focus on a shorter list of stocks we cover or otherwise know and believe to be particularly interesting. We provide brief investment summaries on these focus stocks on pages 4 – 9. We will monitor performance and refresh the screen in approximately 3-4 months time.
Emerging from the clouds
16 Feb 17
Rolls-Royce’s underlying performance in FY16 was ahead of both its own and market expectations. Media focus on the non-cash £4.4bn headline FX loss is missing what looks to be the basis for optimism. As the civil model starts to move from investment in engines for the A350 and A330neo into the aftermarket delivery phase over the remainder of the decade, we think cash flow is likely to improve, particularly if supported by an eventual recovery in Marine.
15 Feb 17
At the current market capitalisation of £29m, we believe the shares are significantly undervalued. We estimate that the highly profitable Maritime business is alone worth at least £40m. With net cash of £9m at end-2016, this implies that the market is currently ascribing a combined negative value of £17m to the rest of the group, which together account for c.54% of group revenues. This is very harsh given the management actions to transform TP Group to a profit-driven Tier 2 specialist services and engineering company are bearing fruits across the divisions. TPG Managed Solutions is expected to more than double its profits in 2017, while TPG Engineering and Design & Technology are on course to deliver sustainable profits from 2019. Even if we ascribe zero value to Engineering, Design & Technology and Managed Solutions, the shares are worth 9.5p a share, a 38% upside from the current share price. BUY.
Small Cap Breakfast
16 Feb 17
Saffron Energy—Schedule One update. Raising £2.5m, expected Mkt Cap £7.7m. Admission due 24 Feb. Italian Oil & Gas Play Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb. Arix Bioscience — Intention to float on the main market from the global healthcare and life science Company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management