Maintel Holdings (LON:MAI) – Seriously undervalued on 9 times current year and just 5.5 times prospective earnings
Just under a month ago Maintel Holdings (LON:MAI), the cloud and managed communication services provider, reported its Interim Results for the six months to end-June.
Its services aim to help its clients operate at the highest level by designing, implementing, innovating and managing their vital digital communication solutions.
The Interim Results (19th September)
On the back of a 1.8% fall in group revenues at £46.6m (£47.5m), the company actually returned a 59.0% increase in its adjusted pre-tax profits at £3.2m (£2.0m), multiplying its Interim earnings per share by some 323% to 11.0p (2.6p).
It also stated that its net debt was significantly reduced to £15.6m (£21.4m), indicating a good cashflow being generated, helped by its improved margins and better managed working capital.
Encouragingly the group, which underwent an organisational and strategic turnaround and restructuring last year, has seen a strong performance in its first-half sales, which gives confidence in its second half and into its 2025 year too.
Interim CEO Dan Davies stated that:
"2024 is a critical year in the transformation of Maintel.
Whilst the Company is no longer benefiting from the delayed order backlog caused by the global semiconductor shortage that bolstered our results in 2023, we instead have the full benefit of the transformation and restructuring work completed in the first half of last year.
It is now about consolidating, embedding and fine tuning the transformation, providing a springboard for the future.
The continued execution of our generalist to specialist strategic pivot has been extremely encouraging, evidenced by key leading indicators such as; a high percentage of pipeline and new wins in both our strategic segments and our target verticals, the increased quality of those new wins in both technology and margin terms, and increased customer experience scores.
These leading indicators are now beginning to come to fruition.
The first half performance saw underlying revenue growth, significant Adjusted EBITDA growth and enhanced Adjusted EBITDA margins.
Our enhanced professional and managed service product offering, including the strategic launch of our new Maintel Application Platform, remains laser focused on helping our customers embrace, thrive and progress in a digital and hybrid workplace, improve their customer experience, securely connect their people to their applications and their data, and protect their business from the ever-growing cyber threat.
The services we provide our customers are vital to their organisations, their people, their customers and their communities and we take this responsibility incredibly seriously.
We expect to show further improvement, building on the first half performance, and I look forward to the remainder of the financial year with cautious optimism."
Analyst Views
Analysts Andrew Darley and Kimberley Carstens at Cavendish Capital Markets are very positive about the business, looking for 400p a share in due course.
They state that:
“Maintel’s continued delivery in line with expectations will lead to its recognition, once again, as a serious investment opportunity.
The June announcement of the £17.8m new multi-year contract wins reinforces the credibility of the business, which still trades at only half the value of its revenue.
The reality of the very strong free cash flow yield of the recovered business brings into focus the extent to which the company is overlooked – 400p target reiterated.”
Their current-year estimates to end-December are for revenues of £103.0m (£101.3m), with adjusted pre-tax profits of £5.8m (£3.9m), lifting earnings to 26.4p (23.5p) per share.
For the coming year, they have £108.0m sales, £8.5m profits, generating a substantial 42.5p per share in earnings.
My View
A year ago, the group’s shares were trading at around 157p, before a Spring impetus saw them hit 286p in late in late April this year.
They are now bouncing around the 235p mark, at which level the group is capitalised at only £33.75m.
On the basis of the Cavendish Capital Markets analyst’s estimates, this group’s shares are an absolute steal.
I can see why they have a 400p Price Objective out on the equity – they really are massively undervalued, in my view.
(Profile 03.06.20 @ 173p set a Target Price of 250p*)
Commentaires