GB Group PLC (LON: GBG) 

GB Group PLC (LON: GBG) is an FTSE AIM UK 50 index listed Company supporting clients to validate and verify the identity & location of their customers. The Company's solutions help organizations to validate and verify the identity and location of their customers. Its segments include Location, Identity and Fraud.

Recent trend of dividend payments

GBG had paid a final dividend of 3.4 pence per share on 03 August 2021, while the ex-dividend date was 24 June 2021. Moreover, it became the thirteenth year of growth in dividends.

Growth Prospects

• Changing Consumer Habits: The changing consumer habits by shifting online resulted in an increased need for fraud prevention solutions.
• Divisional Improvements: GBG had witnessed accelerated recovery in the Fraud business division as it had secured license extensions from two large multinational financial services organisations. The Location business segment got benefitted from the continuing consumer shift to greater online activity.
• New Launches: The Company had launched two new products in the Identity segment; ExpectID Flex API in the US, for the enterprise market, and RapID in the UK aimed at the small business market.

Key Risks

• Interest Rate Hike: The recent interest rate hike of 0.15% to curb inflation may keep investors’ away from UK Equities.
• Sluggish UK Macroeconomic Indicators: The UK Composite PMI fell marginally to 53.4 in January 2022 from 53.6 in December 2021, while the UK consumer price inflation breached a nearly 30-year high of 5.4% in the 12 months to December 2021.
• Wrong Strategic Choices: The failure of partner relationships could adversely impact the business in the near term.
• Federal Reserve Meeting: The Federal Open Market Committee meeting lined up this week may create pressure on global Equities.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of GB Group PLC.

Octopus Investments Limited is the most significant shareholder as it holds nearly 13.08 million shares as of 31 December 2021. 

Financial Highlights (for the six months ended 30 September 2021, as on 30 November 2021)

(Source: Company Website)

• Solid First Half: GBG reported revenue growth of approximately 5.4% in H1 FY22.
• Adjusted Operating Profit: GBG had shown around 3.5% year-on-year growth in adjusted operating profits for H1 FY22.
• Liquidity: At the end of H1 FY22, the Group reported a strong balance sheet with £39.5 million of net cash.
  

Financial Ratios (H1 FY22)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 25 January 2022, at 12:55 PM GMT, GBG’s shares were trading at GBX 615.50, up by around 0.98% from the previous day closing price. Stock 52-week High and Low were 980.00 and GBX 606.00, respectively.

From a technical perspective, the stock price is hovering around the lower Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI of ~27.61 approaches oversold territory. 

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

Business Outlook

The Company had gained positive momentum during H1 FY22 with a decent top-line business growth. Moreover, GBG had shown accelerated progress regarding investment in market-leading technology and developing long-term customer relationships. The Board reiterated its confidence in meeting the financial expectations for FY22. The positive outlook is underpinned by the strong underlying demand in the Identity division, continued solid momentum in the Location division, and recovery in the Fraud division as restriction lifted. However, the stock price may undergo sizeable corrections amid rising inflationary pressure and increasing Covid-19 cases in Europe. In a nutshell, the Company remained well-positioned to generate long term shareholder returns by focusing more on changing market dynamics.

Considering the decent financial performance during H1 FY22, increase in net cash, recent launches, resumption of dividend payments during FY21, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on GB Group PLC at the current price of GBX 615.50 (as on 25 January 2022 at 12:55 PM GMT), with lower-double digit upside potential based on 37.85x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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