Solid State Plc (LON:SOLI) has announced the acquisition of Pacer Technologies, a value-added distributor of opto-electronic components and displays, for c £3.7m cash. Although the transaction is earnings enhancing, triggering a 4.0% uplift in the FY20 consensus EPS, the share price has not moved materially in response to the news and we believe the shares continue to trade at a significant discount to peers.
Highly complementary to existing business
Pacer is headquartered near Reading, UK with a satellite sales office in Florida, providing a base from which the group can address the US market. Pacer’s Weymouth operation, which is where its design capability is centred, includes a small Class 100 cleanroom where opto-electronic sub-systems are currently assembled, potentially extending the value-added offer provided by the rest of the group, in our view. Pacer was founded in 1989 and has expanded its portfolio from photonics-based components to include displays, sensors, LEDs and a wide range of other light-based components and systems. Like Solid State’s value-added distribution division, Pacer’s offer is based on a highly informed technical sale. If an off-the-shelf solution does not exist, Pacer will design and build a tailor-made one, which is similar in philosophy to Solid State’s manufacturing division. Around 40% of Pacer’s revenues are derived from exports.
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