From first-on-scene to second screen
Vislink Plc (LONDON:VLK) appears on track to achieve management’s stated short-term target of £80m annualised revenues and £8m adjusted operating profit by 2014. The group is now entering the next phase of its development, transitioning from being the dominant player in the £230m global broadcast contribution market to taking share in a total available market of £680m spanning traditional broadcast, surveillance, cellular broadcast and playout automation. We now see fair value at 70p rather than 65p, reflecting an increase in the average share price multiples of its peers since March.
Hitting short-term targets
Noting the likelihood of further bolt-on acquisitions, Vislink appears on track to achieve management’s stated short-term target of £80m annualised revenues generating £8m adjusted operating profit by 2014. FY13 group revenues rose by £2.7m (5%) year-on-year to £59.9m. Management’s strategy of expansion outside the mature broadcast markets in North America and Europe paid off, with strong sales to the Middle East compensating for flat or declining sales in other regions. Surveillance sales grew by 16% compared with only 2% for Broadcast, rising from 18% to 20% of the total. Management intends that Surveillance sales will grow to become at least 25% of the total during 2014.
Addressing a larger total available market
The group is now entering the next phase of its development, transitioning from being the dominant player in the £230m global broadcast contribution market to taking share in a total available market of £680m spanning traditional broadcast, surveillance, cellular broadcast and playout automation. It is doing this through a combination of new product development, which has reinforced its strong position in the traditional broadcast market and taken it into the emerging cellular broadcast segment; partnerships with companies such as C-COM Satellite Systems and TVU Networks and acquisitions, most recently of Amplifier Technology in August 2013 and Pebble Beach Systems in March 2014.
Valuation: Trading at a discount to peers
Our comparison of Vislink’s prospective EV/EBITDA and P/E multiples against those of its peers in the broadcast and surveillance sectors shows Vislink is trading at a significant discount to the mean. The size of this discount is greater than that which could be applied solely for a relatively small market capitalisation. Applying a 12% discount for the relatively small market capitalisation gives fair value at 70p share.
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