Equals Share Discussion Threads

[mr stephens] 21/3/2024 08:16

Aim-traded fintech payments group Equals (EQLS:118p), a fast-growing challenger brand in banking and international payments, days as a listed entity look numbered after it attracted bid interest from another party.

A consortium comprising Embedded Finance and TowerBrook Capital has made an indicative non-binding proposal regarding a possible offer for the whole company. This follows a strategic review that has led to ongoing takeover discussions with Madison Dearborn Partners. The Takeover Panel has given Madison an extended deadline of 17 April to either make an offer for Equals or declare that it doesn’t intend to. Equals releases annual results the day before the deadline, which will make for a good read.

That’s because Equals has been disrupting traditional banks by focusing on small and medium-sized enterprises (SMEs). Investment in a cutting-edge technology platform, digital marketing initiatives and bolt-on acquisitions have expanded its offering and addressable market, which is driving a strong earnings


Riding a robust earnings cycle
MOST READ
Small Companies March 20, 2024
Bidding war for Equals Group heats up
In a trading update ahead of the annual results, the board revealed that revenue has risen 28 per cent to £22.2mn in the first 11 weeks of 2024 and that’s after the group delivered 37 per cent higher revenue of £95.5mn in 2023. The operational gearing of the business means that in a positive sales cycle, profits outpace the revenue growth, hence why analysts forecast 65 per cent higher adjusted cash profits of £20mn in 2023. On this basis, earnings per share (EPS) more than doubles to 6.3p. Cash is building, too. Equals started this year with £20.6mn of net cash, up 37 per cent year-on-year, and that’s after investing £7mn on acquisitions, earn-outs and a maiden dividend during 2023.

Furthermore, with cash profit expected to rise to at least £23mn in 2024, the group’s impressive cash generation means that the cash pile could easily increase to £33-£35mn by the year-end. Strip out cash from Equals’ £221mn market capitalisation and its current £200mn enterprise valuation equates to less 8.7 times current year cash profit estimates.

So, having selected the shares, at 119p, as one of my 2024 takeover targets (‘Four small-cap takeover targets to exploit’, 8 December 2023), it now looks increasingly likely that Equals will be bid for in the coming weeks.

An offer for the company around 175p a share seems fair valuation to me, or 45 per cent above the current price. It would also deliver a 127 per cent gain on my 77p recommended entry price (Alpha Research: ‘A high tech fintech payments opportunity’, 8 April 2022). Buy.

[qs99] 20/3/2024 19:43

perhaps we need to keep our own "civilized" thread going for other investing ideas on ADVFN?!

Yes will be a shame for UK PLC but govt need to think of creative ideas to attract new companies on to the markets and help cut red tape where possible. Apparently I have read there is a real dearth of new IPOs....DYOR

[cp42kx07] 20/3/2024 19:08

What an exceptionally rare and civilised thread this has proved to be. Congratulations to all contributors. Forza EQLS!

[masurenguy] 20/3/2024 18:41

Hi binghall - my comments were clearly directed at the moron beatme1, not you.

[swiss paul] 20/3/2024 18:16

Cerillion (CER) up 4% as well today -

[binghall] 20/3/2024 18:07

Yes thanks all, no worries QS99. I'm not sure whether to be happy with a potential bidding war or disappointed that yet another good quality UK company is being taken over because our Stock Market doesn't know how to give fair value to innovative companies.

[stemis] 20/3/2024 16:40

20 weeks (now extended by another 4) seems a long time for bidders to make up their mind

[redartbmud] 20/3/2024 16:22

AISHAM

Thanks for the article behind the paywall.
As useful as a chocolate teapot.

red

[qs99] 20/3/2024 16:11

Great, I'll take that! DYOR

[aishah] 20/3/2024 15:32

Simon Thompson thinks fair take out price is 175p

[qs99] 20/3/2024 15:21

haha, yes sorry bingers, you are still showing, just typing too quickly apologies!!

[boozey] 20/3/2024 14:44

Quite remarkable that on the face of it we have at least two interested parties running the ruler over Equals but the price is broadly where it was before any RNS around possible M&A was announced! Even more surprising when you think that the business is performing strongly anyway.

[mcl1] 20/3/2024 14:10

LTINVEST I agree. If the trading fundamentals justify a 120 sp, then a previous cash pile equating to 10p a share on top of that, plus supposedly best in class IP and the value of the licences through the cost and time saved in applying, (assuming they can be kept under a new owner), must justify more than 150p.

I'm guessing the management team or large holders have requested an announcement delay until the new financial year.

[ashleyjv] 20/3/2024 13:36

QS99 did you filter the right one lol

[ltinvest] 20/3/2024 13:32

Think he meant to filter the other guy

[ltinvest] 20/3/2024 13:31

Interesting day for equals to say the least. Was nice to get a little update. Got to be getting an offer soon now may well be a bit higher as now got 2 potential suitors. A 50% premium would be around the 170-180p mark so would think at least that for a take out price. 150p would probably be way too low now as would only be like a 25-30% premium for a company with great financials and growth prospects.

[binghall] 20/3/2024 13:27

Thanks Masurenguy. Not sure why QS99 would want to filter me, I'm just a normal investor surprised at someone's point-of-view. Takes all sorts I suppose.

[qs99] 20/3/2024 13:16

filtered binghall

[masurenguy] 20/3/2024 12:45

Just ignore the pathetic juvenile troll who just wants to wind you up !

[binghall] 20/3/2024 12:36

Really??! Positive trading update and the potential for other bids and you think this is a time to dump? The world has gone mad....

[velvetide] 20/3/2024 11:20

It could be trading here because the market thinks that there will be no bid high enough to get accepted

Although the longer it trades here then the more stock will be held by risk arbitrageurs who would tender to pretty much any bid

Risk imo is an offer config where management's interests cease to be aligned with shareholders

From an investment point of view it is concerning to have two competing bids on a growth stock the impact of which is not noticeable in the 5-year day chart

[qs99] 20/3/2024 11:04

Given growth profile, the massive market opportunity, net cash and growing, the broker target prices should form the minimum of what is paid by any buyer IMO.

Let's hope the NEDs & Board do their job!

Great to see trading is on track as well.

DYOR