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Broker tips: Victorian Plumbing, RWS Holdings
(Sharecast News) - Analysts at Berenberg reiterated their 'buy' rating and 500.0p target price on RWS Holdings on Thursday following the intellectual property group's in line full-year results. Revenues at RWS grew by 8% year-on-year, adjusted pre-tax profits grew by 17% and earnings per share increased by 12%. Berenberg said RWS' improved performance comes from an extra month's trading from SDL, acquired in November 2020, continued synergy benefits from the combination of RWS and SDL, driving a 160 basis point gross margin improvement, and areas of "strong underlying growth", most significantly in the firm's technology businesses.
Looking ahead, the German bank believes that forecasts for 2023 weer "well set" and that it now assumes 2% constant currency organic growth and a 2% foreign exchange benefit, alongside a year of investment for the group, before a return to strong underlying revenue and profit growth from the 2024 trading year.
"As a result, our view is that the group remains very well placed for medium-term growth and a strong re-rating, with investors able to acquire a business with a more than £70.0m net cash position that has grown EPS at a 15% CAGR from 2010-2022, for just 8.9x EV/ EBIT or 11.9x September 2023E EV/net income," said Berenberg. "Given this, a recovery in cyclical market factors and successes from the company's investment programme should drive material shareholder returns from here."
Barclays upgraded Victorian Plumbing to 'overweight' from 'equalweight' on Thursday, citing gross margin upside potential and an improving track record.
The analysts said Victorian Plumping's investment case was worth revisiting given an improving track record, bolstered by clear long-term conviction and the potential for gross margin upside from falling freight rates.
Barclays also pointed to impressive market share gains and strong positioning into a potential recession, with £46.0m net cash.
The bank also lifted its price target on the stock to 100.0p from 75.0p.
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