Shore Capital says GB Group progress 'going to plan'

(Sharecast News) - Shore Capital has reiterated its 'buy' rating for GB Group after the identity verification specialist's interim results this week, saying the company's progress is "going to plan". GB Group reported on Tuesday a 1.8% rise in first-half revenue on a constant-currency basis, and said it remained confident of accelerating growth in the second half. The firm also posted a 4.6% increase in adjusted earnings before interest and tax, improvements in cash conversion and an additional £10m share buyback programme.

Shore Capital highlighted three key areas of improvement at GB Group: strong momentum in new business wins; increased margins following a long period of margin erosion; and the expected return to growth in the Americas business, where new business is up four times compared with last year.

Regarding the Americas, Shore Capital said: "The go-to-market, customer success and data science teams have all been strengthened, new leadership has been put in place, and we also note the consolidation of the Identity and Location sales teams to enhance cross-sell opportunities.

"Progress is improving, but we want to see this segment return to faster-than-group performance. If and when this happens, we think it would be a key driver of a share price re-rating."

The broker's fair value estimate for GB Group's shares is 390p, which equates to an EV/sales ratio of 3.6x and a price-to-earnings ratio of 21.0x - around a 30% discount to the stock's long-term average.

"Meanwhile, as a mid-cap UK-listed tech stock, potential bid activity provides incremental option value," the broker added.

The stock, which has fallen by a quarter so far this year, was down a further 1.2% at 256p by 1217 GMT.