0R15 9025.0 0.0% 0R1E 9410.0 0.0% 0M69 None None% 0R2V 247.99 9682.643% 0QYR 1567.5 0.0% 0QYP 439.3701 -2.9016% 0RUK None None% 0RYA 1597.0 1.2682% 0RIH 195.55 0.0% 0RIH 191.4 -2.1222% 0R1O 225.5 9683.0803% 0R1O None None% 0QFP 10475.8496 107.8542% 0M2Z 252.573 0.2373% 0VSO 33.0 -7.3164% 0R1I None None% 0QZI 622.0 0.0% 0QZ0 220.0 0.0% 0NZF None None% 0YXG 222.05 -4.1318%
Gamma Communications PLC (LON: GAMA)
Gamma Communications PLC is an FTSE AIM UK 50 Index quoted technology-based provider of communication services in Western Europe. It is a leading provider of Unified Communications as a Service (Upas) into the UK, Spanish, German, and Dutch business markets. It operates with four operating divisions, namely UK Indirect, UK Direct, Overseas, and Central functions. The Company was founded in 2001, and presently, it employs around 1,355 people across all the businesses.
Recent trend of dividend payments
GAMA had a progressive dividend policy and showed a robust increase at a CAGR ranging from 10% to 15% since its IPO in 2014. The Company had paid an interim dividend of 4.4 pence per share on 21 October 2021, while the ex-dividend date was 23 September 2021. The interim dividend growth remained around 13% for H1 FY21 as compared to the prior-year levels.
Growth Prospects
Key Risks
Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of Gamma Communications PLC.
Liontrust Investment Partners LLP is the most significant shareholder as it holds nearly 9.46 million shares as of 30 September 2021.
H1 FY21 Financial & Operational Highlights (for six months ended 30 June 2021, as of 07 September 2021)
(Source: Company result)
Financial Ratios (H1 FY21)
Share Price Performance Analysis
(Source: Refinitiv, Research done by Kalkine Group)
On 26 October 2021, at 09:58 AM GMT+1, GAMA’s shares were trading at GBX 1,827.45, down by around 0.03% from the previous day closing price. Stock 52-week High and Low were 2,350.00 and GBX 1,425.00, respectively.
From a technical perspective, the MACD line remained above the signal line, indicating an upside potential in the stock price.
Over the last two years period, GAMA’s stock price has delivered a positive return of ~61.01%, and it has outperformed the FTSE All-Share Telecommunications Service Providers index (benchmark sector) with a return of negative 22.63% and FTSE AIM UK 50 index (benchmark index) with a return of approximately 32.62%.
Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)
Peers used in the valuation methodology (Price/NTM Earnings)
Business Outlook
The sales activity had returned to a normal pace and witnessed a robust revenue growth for H1 FY21. GAMA had anticipated total FY21 revenue ranging from £446.8 million to £460.0 million, while adjusted EBITDA to fall in the upper range of between £90.5 million and £95.0 million. Nonetheless, the Company had a robust business model having more than around 89% recurring revenue during H1 FY21 and strong revenue visibility for the remainder of 2021. In addition, the Company maintained an optimistic long-term market outlook, with the future adoption of cloud services forecast to grow across all markets. However, considering the rising inflation worldwide and increasing bond yields, the stock price may undergo adverse volatile movements. Overall, GAMA aimed to generate long term returns for the shareholders with an exciting portfolio and roadmap of new product launches and capabilities.
Considering the solid interim dividend growth, robust top-line business growth, strong profitability, new launches, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Gamma Communications PLC at the current price of GBX 1,827.45 (as on 26 October 2021 at 09:58 AM GMT+1), with lower-double digit upside potential based on 29.96x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).
*The reference data in this report has been partly sourced from REFINITIV.
*All forecasted figures and Peer information have been taken from REFINITIV.
*Dividend Yield may vary as per the stock price movement.
*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.
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