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magazineGB Group in £74m acquisition
GB Group (GBG:AIM) 347p
Gain to date: 37.2%
Original entry point: Buy at 253p, 27 October 2016
Identity security management specialist GB Group (GBG:AIM) is making a substantial acquisition, buying postcode validation firm PCA Predict in a £73.8m deal.
The deal is being funded by existing cash of £15.8m and an additional £58m which has been raised through a placing of 17.06m new shares at 340p, representing 12.7% of GB’s existing share capital.
The combination creates a group with turnover of more than £100m based on PCA’s unaudited revenue of £13.7m in the 12 months to the end of February.
It comes off the back of a strong year-end trading update on 27 April by GB Group which revealed adjusted operating profit of £17m ahead of £16.4m consensus for the year to 31 March 2017.
This beat was driven by an impressive 19.5% operating profit margin which is already closing in on the 20% targeted by 2019.
The stock continues to reward the faith we displayed last October after the company reported a disappointing first half. We correctly surmised this was a blip rather than part of a wider negative trend.
We retain our faith in the stock, as Peel Hunt’s technology analyst Paraag Amin has noted ‘no-one else does what GB does and it is backed by macro trends’.
Keep buying. (TS)
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