Ascential PLC (LON:ASCL) has been upgraded to ‘Buy’ from ‘Hold’ by Berenberg after a number of “high-quality acquisitions” and improvements in asset quality led the bank to up its growth forecasts for the firm.
In a note, analysts said they were now forecasting 18% earnings per share (EPS) compound annual growth rate (CAGR) for 2018-20 following “the integration of higher-growth acquisitions but also an uplift to forecasts on certain existing brands”.
READ: Ascential splashes US$60mln in cash to acquire US Amazon consumer managed services provider, Flywheel Digital
“With just 2% organic growth in H1 2018, we believe comps will also allow for significant growth in 2019E. Not only should this build sentiment in the short term, but with management reiterating its intention to return to double-digit organic growth over the next few years, this leaves upside to consensus top-line estimates which remain below this level.”
Berenberg added that it expected Flywheel Digital, a provider of managed services to consumer product companies trading on Amazon which the FTSE 250 media firm purchased for US$60mln in November, to double revenues in 2018 and be “5% accretive to future earnings”.
“With the addition of more e-commerce analytics brands into the portfolio throughout 2018, coupled with the disposal of the company’s legacy exhibitions portfolio to ITE, Ascential’s revenue mix has changed meaningfully. Specifically, it should derive c45% of 2018E revenue from digital subscription products, up from 30% in 2017.”
The bank also upped its target price for Ascential to 470p from 400p, adding that the brands could see “significant margin improvements as they mature”.
In mid-morning trading Thursday, Ascential shares were up 1.7% at 381.6p.