Alpha Financial Markets Consulting PLC (AIM:AFM) was coy with precise numbers on Wednesday when it upgraded revenue and earnings expectations, but house broker Berenberg was more forthcoming.
“We understand this to mean a c10% upgrade to consensus, and an 11% upgrade to our FY 2022 EPS [earnings per share] forecasts, which now assume 35% growth yoy [year-on-year],” Alpha’s joint corporate broker said.
The provider of specialist consultancy services to the asset management, wealth management and insurance industries saw increased client demand in the year to the end of March, with its consultants much in demand.
The demand for consultants might revert to the mean in the current year, Berenberg conceded, but it remains “strongly convinced” that the company’s top-line growth will continue, “driven by a range of supportive structural tailwinds, a clear competitive advantage versus larger professional services peers, and successful expansion into new geographies and markets”.
The broker added that caution for the current year is “understandable” but reminded its clients Alpha has a track record of over-delivery.
“We upgrade our FY [full-year] 2023-24 forecasts by just 4% and 1% respectively; however, given 1) commentary in today’s release about a growing opportunity pipeline, 2) commentary from last month’s capital markets day about Alpha’s confidence that it can pass on salary inflation in higher rates, 3) the company’s history of upgrading expectations and 4) balance sheet flexibility over future M&A, we believe that these forecasts are somewhat conservative and can be upgraded again,” Berenberg said.
The broker stuck with its ‘buy’ rating and left its 470p price target unchanged.
Alpha’s shares currently trade at just under 400p, giving it a market capitalisation of £444mln. Berenberg noted that Alpha has £60mln in cash on the balance sheet, which is 13.5% of its market cap, giving the company significant flexibility for future capital deployment, whether it be bolt-on acquisitions, increased returns to shareholders or both.