I did average down last time, now I am questioning whether to average down on the average down... hmphhh |
GATC is one of the most illiquid shares I own. Big moves on tiny volumes.
Maybe now is finally the time to average down...!! |
 Gattaca plc - from Research Tree (Equity Development) - 31st March 2022
The shares appear oversold
Successful investing is all about spotting opportunities and being prepared to hold through thick & thin. Take Gattaca, the UK's largest specialist engineering/tech recruitment agency. Its shares have fallen >70% (vs c. -25% sector) from their 52 week high of 285p - principally due to January’s profit warning. There is work to be done, but even so we believe the scale of the sell-off looks totally disproportionate to the issues involved (Re temporary disruption from a major IT system implementation, staff turnover/culture, etc).
The economic backdrop remains healthy
Indeed one might argue that - despite fears surrounding the cost of living crisis, geopolitics & a flattening yield curve - the macro environment for UK staffing firms (especially STEM related) is actually pretty robust. Characterised by demand far outstripping supply, increasing salaries, low unemployment (UK at 3.9%) and plentiful job vacancies for those seeking work.
Green shoots tentatively appearing
The good news is following the recent appointment of Matthew Wragg as CEO - a highly capable & experienced industry professional with ‘sales’ running through his veins. The early signs of a successful turnaround are tentatively taking shape, with productivity levels inching up anecdotally MoM since January. Furthermore the company is “seeing encouraging trends across many of its sectors”. Sure this won’t translate into the financials over-night, yet equally we suspect patient investors will be richly rewarded in the fullness of time.
Ok, so what’s the outlook for FY’22?
Well, near term the Board are guiding to a “breakevenR21; adjusted PBT. But expect FY’23 to “deliver a return to profitable and sustainable growth”, as the benefits of higher & more productive fee-earners drive the top line. Longer term too, the fundamentals are positive, especially for Gattaca’s sweet spots of software, digitisation, renewables (eg Off-shore wind & hydrogen), electrification, defence (cyber & marine), engineering and infrastructure (eg HS2, fibre-to-the-home, Lower Thames Crossing, etc).
Our conservative forecasts still justify a 145p/share fair value
Hence in this context, we have pencilled in FY23 PBT of £2.5m on NFI of £49.1m with a 145p/share fair value. Albeit these estimates are prudent, & we would ultimately hope to upgrade as key milestones are met. Similarly, we assume the FY22 dividend will be temporarily suspended, leaving net funds (pre IFRS16) of £5.0m as at Jul’22 (excluding £10.4m of non-recourse finance).
Confident of driving future growth
CEO Matthew Wragg adding: “We are in a strong position to focus our energy once again on our STEM markets, helping our customers with their talent challenges during a period of particularly high demand. It is against this backdrop that I am optimistic for the future and excited for everyone in the team.” |
Nobody cares Blackhorse, try and think of something thought provoking on this company. Or do you want all bb's to be places where people post their buys? |
bought MCB Today , hiking coming |
What's going on here? |
Glad bought IGR |
Blackhorse23 - you sold up on the 10 Feb anyway didnt you..? Hmmm. |
Company not performing well , shift to IGR |
Pretty sure I read that there would be a trading update today??? |
Are you kidding??? Ukraine needs arms and re-building at some stage. And the UK has been extra nice to them.
:op |
That's probably more the Great Resignation than a boom in recruitment but we will see. I expect a coming recession will cloud their outlook and they will be cautious |
Nahh, was unaware of NT investing in this, there's only so much info my brain can deal with so I focus on what I conclude rather than follow others. I'm hoping for some positive news here this Friday. Unemployment seems to be falling. |
Holy f@ck ok I get it. Yep that's a pretty severe case of catching the falling knife. Were you influenced by the NT at all? He was so confident in this again and again mentioning it as cheap as chips as well as at the seminars. There must be loads of ppl who get suckered into this before the big fall. I just have the one position but it's still painful to see the size of the % decline. I did do research but wouldn't normally go for cos of this size tbh. I would double down now to bring the average down to 100 and hope to get out at break even but have no trust in mgmt here until the new guy can prove he can turn this around |
Well I initially did quite well out of it by going in and out. I re-entered at just under 174 and then put in double my 174 entry at just under 136 and, yes, you guessed it, once I thought it had bottomed out, I further added 5 times my 174 entry at just over 78 (gift horses and mouths -yeah right!). Catastrophic scratches the surface. Like I said, clenched bum and hope. |
Thanks for your honesty. Refreshing to hear that! But if your average is 100 ish then that's not too catastrophic? In fact quite remarkable as I imagine most who held on are here from a far higher price. I still have a holding from pre crash so unless I average down and hope for a rerate to 100p plus then not likely to recover. But seems far too risky to commit any more to this as, like you say, it could now get worse. If they start to turn a profit might be enough time to get back into any new uptrend without adding to risk here. Like you I feel I may as well hold on here, my error was not immediately taking the loss at 100p in the day of the last update. I didn't think it would drift as low as it has but the gen market sentiment is awful |
So why didn't you sell at 95p, NT cut and ran and hasn't mentioned them again. The price has fallen by another third since then with the drip drip drip lower. Suddenly you end up sitting on really large % loss. My head says no improvement coming with this share but taking a loss always hard if you think there's a chance of a turnaround. The advice to take losses always seems to jar with the advice that you haven't made a loss until you actually incur it.... |
Of course it can get worse and I'm already underwater here by more than I would otherwise tolerate. I haven't seen Russia mentioned anywhere, there's inflation, there's recession... and covid hasn't really gone away. It will be interesting to see what has changed, if at all, since the last update and where things are heading. I suspect that around 5.5m went on the vat deferral from that 20m that went off. However, £5.5m of net vat can be reverse calculated to see what the basic net of vat revenue was after any vat being reclaimed over whichever period the deferral figure proportionately concerned. |
Oh wow. Surely it cannot get any worse.....can it? Incoming recession is not going to be good for recruitment market. But hoping they were conservative with their break even forecast and that even if things have not picked up they aren't worse. If it's in line then surely cannot fall much further but I guess even at this level they need a profit of around £2m to put this on a PE of 10 vs break even forecast. And now the cash on the balance sheet has gone means it doesn't look as cheap as when the NT was tipping this |
Decent director buying in Staffline recently.
And contract wins there.
+ve read across?
Hope Gattaca's mgt team have managed to get a grip on their company! |
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