Vitec Group - 'capture the moment' and take a shot at this stock right now
Although the interim results are not due from Vitec Group (LON:VTC) until Thursday 8th August, which is when we will get an update on current year trading, I do believe that investors looking for solid capital growth should currently be buying this company’s shares.
I have followed Vitec for decades and always considered it to be a ‘class’ operation.
Its history goes back over 110 years to 10th January 1909, when William Vinten, a mechanical engineer received his first order for 25 Kinemacolor Projectors. The buyer was Charles Urban, producer of the world's first successful motion picture colour system.
The Group today is still in the same marketplace, one which has expanded massively over the years.
Its activities include the design, manufacture and distribution of high performance products, such as camera supports, camera mounted electronic accessories, robotic camera systems, prompters, LED lights, mobile power, monitors, bags, motion control and noise reduction equipment.
Vitec operates in the fast moving and growing ‘image capture and content creation’ market. Overall that market is an attractive one, with growth driven by tan ever-increasing number of content creators, to whom it is a leading provider of premium branded products and solutions.
Its products and services encompass a variety of technologies, designed and engineered to ensure that, whatever the conditions, the image maker has the best equipment to ‘capture the moment’.
With its products sold across the world, the Group’s customers include broadcasters, independent content creators, photographers and enterprises. Whether engaged by a TV network, film or other production company, a corporate, educational or religious establishment, operating as an independent business, or an amateur, the user is the same – an image maker.
The Company employs some 1,800 people in 13 countries globally. It is split into three divisions: Imaging Solutions, Production Solutions and Creative Solutions.
The Imaging Solutions division designs, manufactures and distributes premium branded equipment for photographic and video cameras and smartphones, and provides dedicated solutions to professional and non-professional image makers and independent content creators.
This consists of camera supports and heads, tripods, camera bags, lighting supports, LED lights, lighting controls, motion control and lens filters, marketed under the most recognised accessories brands in the industry.
The Production Solutions Division designs, manufactures and distributes premium branded and technically advanced products and solutions for broadcasters, film and video production companies, independent content creators and enterprises.
Products include video heads, tripods, lights, batteries and speciality camera systems. It also provides premium services including equipment rental and technical solutions to TV production teams and film crews.
Vitec’s Creative Solutions Division, develops, manufactures and distributes products to equip, educate and support independent content creators and cinematographers, improving the workflow and giving them the freedom and confidence to create content in multiple ways.
Products for this fast-growing market include video transmission systems, monitors, lens control systems, camera accessories, noise reduction equipment as well as software applications. It also provides enterprise video solutions to corporates, Governments and houses of worship.
The capture and sharing of images is a dynamic market that has transformed over the past decade and it is continuing to change – Vitec is determined to continue to be a leading supplier to that market.
Its strategy is to grow organically, to improve customer service, to increase its margins, and finally, to invest in new technology and markets using focused acquisition criteria.
It enjoys strong cash generation and boasts a robust balance sheet.
Its aim is to remain as the world’s leading imaging accessories company and its digital improvements in web marketing and its e-tail capabilities will enable it to take advantage of its further growth opportunities.
As at the end of May its institutional shareholders included: Alantra Asset (15.16%), Aberforth Partners (9.09%), Canaccord Genuity (6.32%), Franklin Templeton (4.86%), Royal London (4.68%), Gidema (4.35%), FIL (4.20%), Janus Henderson (3.84%), Schroder (3.60%), M&G (3.46%), NN Investment Partners (3.37%), and Heronbridge Investment (3.32%).
With its shares at 1150p, and with 45,362,709 in issue, Vitec Group has a market capitalisation of £521.67m.
In the year to end December 2018 the Group reported sales of £385m, upon which it made £37.9m pre-tax profits, worth 75.6p in earnings and covering twice the 37p dividend per share.
Estimates for the current year are for £412m sales, £47m profits, earnings of 66.7p and dividend of 39.4p per share.
The next year’s estimated sales of £421m, £56m of profits, earnings of 86.4p and a dividend of 42p per share could well be underestimates, but we will have to wait and see.
I have seen estimates for 2021 suggesting £444m in sales, pre-tax profits of £60.7m, earnings of 95.6p and a 44.5p dividend.
In my view they show just how strong this company really is and how undervalued its shares are – earnings growth like that merits at least a 20 times historic rating.
Market leading positions for its products emphasise the requirement for a premium rating.
I see the shares of Vitec Group hitting 1600p by the end of next year, putting them out then on a low 16.7 times prospective.