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Crestchic significantly upgrade guidance after strong H1

06:38, 9th August 2022

[source: Crestchic]

You can’t keep a great business down. Indeed despite the uncertain macro-economic & geo-political climate – power reliability expert, Crestchic (LOAD) Follow | LOAD“significantly” upgraded guidance again today on the back of buoyant H1’22 trading, record equipment orders & improving profit margins.

Not just for its mission-critical loadbanks from secular growth areas, such as data centres and renewables (eg battery farms). But also right across the board – covering almost every geographical region (eg Middle East, US, Europe, Asia, etc) and vertical market (eg oil & gas, infrastructure, Marine, etc).

The only problem now being to ramp up supply quickly enough to satisfy soaring demand. For instance, by lifting production capacity & hire fleet utilisation, alongside buying/refurbishing older loadbanks and using 3rd party contract manufacturers.

The good news is LOAD’s expansion strategy is going down a treat. With the company adding that this was a “sustainable step change in underlying performance”. Sure inflation and supply chain challenges remain, yet equally these are being managed via internal efficiencies, sensitive price increases and imaginative procurement.

FY22 adjusted EBITDA (pre-IRFS16) & PBT forecasts to £10.0m (vs £8.2m B4 & £6.5m LY) and £7.0m (£4.9m B4, £3.3m LY) respectively, on revenues up 35% YoY to £40m (£34.2m B4, £29.5m LY).

Hence driving Dec’22 ROCE up to 28.5% (18.1% LY) with net cash closing at £2m (-£1m LY), whilst similarly pushing the valuation 20% higher to 330p/share (vs 275p B4) - based on a 10x EV/EBITDA multiple & a 12% post tax cost of capital.

Moreover, I actually think this is conservative given Crestchic’s strong growth trajectory, positive operating leverage, mission critical operations and long life rental fleet (ie c. 20 years reflecting few/no moving parts) - which requires far less replacement capex than many of its plant hire peers.

Exec Chairman Peter Harris commenting: “We remain very confident in our strategy, the strength of our markets and our prospects for continued growth. Plus, the last bits & pieces of the Tasman disposal (re Middle East) should be wrapped up soon.

Therefore putting all this together, at 195p Crestchic is a materially undervalued, high quality, GARP stock - trading on modest multiples of 5.7x EV/EBITDA and 10.2x PE.

 

Stock Chart | LOAD
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