Record profits, with more to come in FY14
Vislink Plc (VLK.LSE) FY13 results show that management’s diversification strategy is able to deliver growth in a fairly static global broadcast market. The acquisition of Pebble Beach Systems earlier this month is expected to accelerate this growth and take the group closer to achieving its stated target of annualised revenues of £80m generating £8m adjusted EBIT by 2014. We reinstate our estimates and now see fair value at 65p/share.
Record revenues and profits in FY13
The FY13 results were broadly in line with our estimates. Group revenues rose by £2.7m (5%) year-on-year to £59.9m, slightly behind our estimate of £62.2m. Management’s strategy of expansion outside the mature broadcast markets in North America and Europe paid off, with strong sales to the Middle East in both the broadcast and surveillance sectors compensating for flat or declining sales in other regions. Amplifier Technology, acquired in August 2013, made a small but material contribution to revenue growth. Operating profit, adjusted for amortisation of acquired intangibles, share-based payments and non-recurring costs, rose by 38% to £4.5m, slightly ahead of our £4.4m estimate.
Recent acquisition to deliver further growth in FY14
Vislink’s existing product portfolio for the broadcast market is focused on the capture of live TV coverage of news, entertainment and sports events. The acquisition of Pebble Beach Systems last week extends this to include the television automation and media management services used in broadcast studios. Vislink will now be able to offer a complete “scene-to-screen” solution to broadcasters. Management expects the acquisition to be immediately earnings enhancing and sees opportunity for cross-selling Pebble Beach Systems’ product to existing broadcast customers. Our estimates treat any potential cross-sales as upside.
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 that 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 65p share.
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