Altitude Group – Still In The Ascent
This coming Thursday, 14th September, will see Altitude Group (LON:ALT) the branded merchandise provider, hold its AGM to approve its 2023 results.
Since Master Investor profiled the company in mid-June its shares have been up nearly 28% before easing back to being just 21% better by last Friday night.
Ahead of the AGM and with further news expected within the next few months, I do believe that the shares could still be an absolute bargain.
The Business
The Sheffield-based Altitude Group owns and develops the largest suite of technology services tailored to the personalised product marketplace worldwide.
The company offers patented technology platform to its network with a built-in supply chain, as well as combines an e-commerce trading platform with a cloud-based CRM and order management system for business intelligence requirements; e-commerce website solutions with in-built patented online designer and pre-loaded product databases; patented online design solutions; and virtual sample services that allow personalised design on a product with imprint technique.
It also provides various services, such as supplier relations, negotiated group discounts, events and exhibitions, catalogues, artwork services, and marketing programmes.
In addition, the company provides various design tools, applications, and web site pop-up stores for promotional product distributors and suppliers.
The company operates through two segments: North America (92.7% of group sales) and the UK and Europe (7.3%).
On a Sales per Business basis Merchanting makes up 54.6% of revenues, while Services accounts for 45.4%.
This year Altitude has secured a number of contracts to provide technology and e-commerce solutions, marketing tools, and supply chain know-how in the US educational/collegiate market, known as Gear Shops.
The contracts announced on 28th March, worth an expected combined revenue of $30m over five years, were due to start this month.
The group’s sales growth is likely to be driven by the ongoing expansion of its Merchanting division, while also seeing steady progress being made in Services.
The Equity
There are some 70.85m shares in issue.
Larger holders include Martin Varley, Dir, (14.2%), Simon Taylor (13.4%), Keith Willis (9.49%) Stonehage Fleming Investment Management (6.10%), M J & M C Murphy (5.93%), Chelverton Asset Management (5.65%), Hargreaves Lansdown Asset Management (5.51%), AJ Bell Asset Management (3.63%), Charles Stanley (3.11%), Peter Hallett, Dir, (1.83%) and River & Mercantile asset Management (1.07%) of the equity.
Brokers View – Discount To Intrinsic Value
Analysts Andy Hanson and Carl Smith at Zeus Capital recently updated their forecasts for this year and the next two following.
For the current year now underway to end March 2024, taking benefit from the new contracts, they estimate a near 39% uplift in sales to £26.1m, with a 44% boost to £1.3m profits and generating 1.7p (1.6p) earnings per share.
Looking into the 2025 year they see £35.6m sales, £2.2m profits and earnings of 2.5p per share.
Jumping further ahead into 2026 the brokers go for £44.1m sales, £3.0m profits and earnings of 3.2p per share.
Ahead of the November announcement of the first half figures, the brokers consider that Altitude’s shares are trading at a discount to intrinsic value.
Based on their various criteria the analysts have a top valuation for the group’s shares at 64.2p.
However, taking an average of those values they now value the shares at 57.6p each.
My View – Continuing To Gain Height
I believe that the shares of this £36m capitalised company will continue to reflect its potential for future growth, supported by its debt-free position and its undrawn £1.7m facility.
Since my mid-June Profile on the group, the shares have performed very well indeed, peaking at 53p earlier this month.
Last Friday night they closed at 50p – absolutely spot on my initial objective, they are sure to rise up again, helped by corporate news from this week’s AGM (14th), the end October first half Trading Update, followed by the end November Interim Results announcement and any other news in between.
This little group has significant prospects, and its shares will rise accordingly, with so much more to go for yet.
(Profile 16.06.23 @ 41.5p set a Target Price of 50p*)
(Asterisk * denotes that Target Price has been achieved since Profile publication)
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