This morning, despite being impacted by geopolitics in Russia and forex headwinds (ie higher £ vs € and EM currencies), Tristel reminded investors once again the resilience, strength and underlying momentum behind its business. Saying that both revenues and profit were ahead of budget for the 10 months to 30 April 2015 – and raising adjusted FY15 PBTA expectations to at least £2.5m (£1.4m H2 vs £1.1m H1), or +39% up on last year’s £1.8m.
We estimate this represents LFL top line growth of 15%, driven by favourable performances from UK, German and Australasian direct sales. Additionally as operational best practise is rolled out across its 3rd party channel partners, we reckon it is only a matter of time before distributor volumes also catch-up. Elsewhere there may be upside in Russia too, given the Board are looking at ways to reverse the “disappointing” country-specific numbers.
In total, we have increased our FY15 sales and adjusted EBITA forecasts to £15.5m (from £15.3m) and £2.5m (£2.3m) respectively. The Board’s stated goal is to lift turnover [organically] by at least 50% over the next three years from the FY14 base line of £13.5m – which is expected to push PBTA margins above 15%
With regards to valuation, we upgrade our price target from 100p to 110p/share – and reiterate that the stock looks cheap at 84p compared to industry EV/sales and EV/EBIT benchmarks (see below).