Currency in GBP
Last close As at 09/06/2023
GBP9.15
▲ 2.00 (0.22%)
Market capitalisation
GBP882m
Research: TMT
discoverIE is acquiring Magnasphere, a US-based designer and manufacturer of magnetic sensors and switches for cash of £19.1m. The business will operate within the Variohm cluster in the Sensing & Connectivity division. The deal fits well with the group’s strategy, providing strong operating margins (28% in CY21) and good growth prospects, as well as further access to international markets. We estimate the deal is likely to improve FY24 underlying operating margin by c 0.3pp to 11.5% and FY24 EPS by c 1.8%. We will update our forecasts when the deal closes, with vendor shareholder approvals expected in Q423.
discoverIE Group |
Acquiring US sensor specialist |
22 December 2022 |
Share price performance Business description
Analyst
discoverIE Group is a research client of Edison Investment Research Limited |
discoverIE is acquiring Magnasphere, a US-based designer and manufacturer of magnetic sensors and switches for cash of £19.1m. The business will operate within the Variohm cluster in the Sensing & Connectivity division. The deal fits well with the group’s strategy, providing strong operating margins (28% in CY21) and good growth prospects, as well as further access to international markets. We estimate the deal is likely to improve FY24 underlying operating margin by c 0.3pp to 11.5% and FY24 EPS by c 1.8%. We will update our forecasts when the deal closes, with vendor shareholder approvals expected in Q423.
Acquisition |
Electrical components |
Year |
Revenue |
PBT* |
Diluted EPS* |
DPS |
P/E |
Yield |
03/21 |
302.8 |
27.2 |
22.4 |
10.15 |
32.6 |
1.4 |
03/22 |
379.2 |
37.6 |
29.4 |
10.80 |
24.8 |
1.5 |
03/23e |
426.1 |
42.2 |
31.7 |
11.45 |
23.1 |
1.6 |
03/24e |
438.9 |
43.7 |
32.9 |
12.00 |
22.2 |
1.6 |
Note: *PBT and EPS as per discoverIE’s underlying metric, excluding amortisation of acquired intangibles and exceptional items.
discoverIE has announced that it has agreed to acquire Magnasphere Corporation, a US-based designer and manufacturer of high-performance magnetic sensors and switches for industrial electronic markets, including access control, data centres and specialist vehicles industrial electronic applications. Magnasphere was founded in 2002, is based in Waukesha, Wisconsin and has manufacturing facilities in Goshen, Indiana. The company is paying a cash consideration of $22m/£19.1m on a debt-free, cash-free basis, funded from existing debt facilities. This increases pro forma gearing as at 30 September 2022 from 0.8x to 1.1x, still well below the company’s target 1.5–2.0x range. For CY21, Magnasphere generated revenue of $6.8m/£5.7m and PBT of $1.9m/£1.6m, with an operating margin of 28%. The business has continued to grow well in CY22. The deal requires vendor shareholder approvals, which are expected to be received in the last quarter of FY23. Management estimates that the deal will be immediately accretive to underlying earnings and operating margin. Magnasphere management shareholders will transition leadership to existing ongoing management over a period of up to 12 months.
|
|
Research: Investment Companies
The last 12 months have been difficult for Lowland Investment Company (LWI). Combined, the weakness in UK mid and small caps’ performance, UK corporate earnings and value investing have been a notably powerful headwind for this multi-cap income portfolio. However, the managers, James Henderson and Laura Foll, are resolute in maintaining their mildly contrarian approach to investing in under-researched small- and mid-sized UK companies for growth in capital and income while selectively blending with larger, less volatile, above-average dividend paying companies. Thus, it is reassuring to see the very strong recovery in portfolio revenue through FY22 (+43% y-o-y) from the depths of the pandemic, which gives some indication as to the resilience and positive outlook for the portfolio at the company level. In addition, LWI’s portfolio is currently trading on a historical P/E ratio of 8.7x versus its long-term average of 12.7x and the broad UK market’s valuation of 9.6x. As a result, we believe LWI offers investors an attractive way to access the whole breadth of the UK market for both capital and income returns.
Get access to the very latest content matched to your personal investment style.