Going, going, going – that is how the shares of Auction Technology Group (LON:ATG) are sure to be moving.
On Wednesday of this week, 27th November, this £530m-capitalised business will be declaring its Final Results for the year to the end of September.
From what I see, this group’s shares are undervalued.
The Business
ATG is an investment holding company that provides management services to its subsidiaries.
It has been supporting the auction industry since 1971 and the group has offices in the UK, US and Germany.
The business is the operator of marketplaces for curated online auctions, seamlessly connecting bidders from around the world to around 4,000 trusted auction houses across two major sectors: Industrial & Commercial ("I&C") and Art & Antiques ("A&A").
The group powers eight online marketplaces and listing sites using its proprietary auction platform technology, hosting just under 86,000 live and timed auctions each year.
ATG enables bidders from 165 countries to access an underexplored world of secondary goods which have been curated by over 3,900 trusted auctioneer experts.
Its services and technology work by creating a virtuous circle that benefits both auctioneers and bidders.
ATG is an aggregator in the large and fragmented auction industry.
The company helps to simplify and integrate multiple parts of the online auction process, from the cataloguing of items to marketing, auction hosting, bidding and most recently payment solutions.
In doing so, ATG enables auctioneers to become genuine online businesses in a cost-efficient way.
Its Operations
Its operations are divided into four segments: Arts & Antiques, Industrial & Commercial, Auction Services, and Content.
The Art & Antiques segment offers auction houses that specialise in the sale of arts and antiques access to the platforms thesaleroom.com, liveauctioneers.com and lot-tissimo.com.
The A&A market covers several different categories, including watches and jewellery, furniture, fine art, decorative art, collectables (e.g.sporting memorabilia, antiquarian books, stamps and coins, vintage toys), vintage fashion and classic cars.
The Industrial & Commercial segment offers auction houses that specialize in the sale of industrial and commercial goods and machinery access to the platforms BidSpotter.com, BidSpotter.co.uk and Proxibid.com, as well as i-bidder.com for consumer surplus and retail returns.
The I&C market covers used equipment, machinery and commercial vehicles from industries such as manufacturing (including plastic moulding, metalworking, woodworking, food and beverage production), laboratories and pharmaceuticals, warehousing, construction, agriculture and real estate.
It also includes surplus stock of consumer goods and retail returns, from all areas of retail including apparel, electronics, homewares, and furniture.
The Auction Services segment includes auction house back-office products with auction mobility and other white-label products, including Wavebid.com.
The Content segment is focused on the antiques trade Gazette paper and online magazine.
Some Indicative Numbers
The group employs around 396 people.
Over 3,900 auction houses use ATG platforms.
Last year ATG facilitated some 86,000 auctions.
In 2023 around 7m lots were sold.
Last year 100m bids were placed through ATG.
ATG has bidders in 165 countries across the globe.
Latest Trading Statement
On Thursday 10th October, the group provided an update on its trading performance for the year ended 30th September.
It informed investors that it expects full-year revenue to be $174m, an increase of 5%.
The group's cost performance was stated to be in line with its expectations to deliver a significantly improved adjusted EBITDA margin in the second half of the year, benefiting from the phasing of costs.
The company expects its adjusted EBITDA margin to be between 45% and 46% for the full year.
Through ongoing strong cash generation, the business continues to expect its adjusted net debt-to-adjusted EBITDA ratio to be at 1.5x at year-end.
Brokers View
There are some seven analysts following the company, mostly recommending that the shares are a Buy.
The Price Objective High was 940p, the Low being 380p – while the average was 652p per share.
RBC Capital Markets reiterated its ‘sector perform’ rating but lowered its price target to 520p (540p).
Jefferies initiated its coverage with an ‘underperform’ rating and a price target of 380p.
Analyst Ian McInally at Cavendish Capital Markets was the broker with the highest Price Objective of 940p on the group’s shares.
His estimates for the last year to end-September, were for $177.5m ($165.9m) revenues, with adjusted pre-tax profits of $60.5m ($53.1m), taking earnings per share to 37.5c (39.8c).
For the year now underway he goes for $192.9m revenues, $71.1m profits and 43.2c in earnings.
Further down the line, his estimate for 2026 is $212.3m sales, $82.1m profits and 48.8c per share in earnings.
The Equity
There are some 121.92m shares in issue.
The larger holders include TA Associates Management (12.59%), Abrdn Investment Management (5.11%), T. Rowe Price International (4.97%), BlackRock Investment Management (UK) (4.99%), Jupiter Asset Management (4.76%), ECI Partners (2.96%), Chelverton Asset Management (1.72%) and Columbia Threadneedle Asset Managers (0.87%).
Two of the group’s Directors hold shares – CEO John-Paul Savant (2.11%) and Tom Hargreaves, CFO (0.86%).
My View
I do like the feel of this globally operating group, its technology helps it to stand out, while the potential of such future turnover and profitability makes its shares look attractive at the current 445p.
We will get a much clearer picture come this Wednesday with the publication of its finals, while also waiting for its AGM comment at the end of January next year.
With this Profile I initiate my own coverage of the company and now set a Target Price of 550p.
(Profile 25.11.24 @ 445p set a Target Price of 550p)
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