Touchstar Share Discussion Threads

[smithie6] 12/3/2024 09:21

Post 2231 from Rivaldo

An excellent summary imo.

I especially liked this text.
(The +40% PBT envisaged for 2024, good info, I didn't know that)

"Further, TST managed to raise margins such that PBT increased 60% and is expected to increase another 40% this year, to give a £1m PBT against an £8m m/cap.

TST are now on an ex-cash P/E of just 7.0 for this year. Jim Slater's PEG is only 0.48.

These indicate that TST is now on a bargain valuation"

======

But !

£1m PBT for 2024 should imo be PAT & not PBT, after adding in the expected tax credit.

----

I make the 'real' nett assets ~£5m (since I count the intangible assets as a real value since those assets produce real profits, recurring revenue & the hardware designs have real value imo)
Giving an enterprise value of ~£3m.
With £1m PAT pencilled in for 2024 it makes the shares/company look very cheap. And hence a takeover target imo.
Possible buyers
- Zebra (USA)
- Journeo (UK). Lse:jneo
- any European competitors

But probably best if TST keeps going as it is & keeps growing & give time for the opportunities (USA & Europe) to be delivered. (Some existing contracts are with big companies with operations outside of the UK, hopefully those clients will, over time, wants Touchstar kit on their installations outside of the UK as well as in the UK (tomorrow I might try to look back at past contracts won to see the links/opportunities/wins outside of the UK).

[smithie6] 12/3/2024 09:14

Rivaldo
...I've corrected my post to remove the reference to WH Ireland, now credited just to you.

For Touchstar I think we have very similar opinions/evaluations.

[rivaldo] 12/3/2024 09:04

Smithie6, the paragraph you quote in 2229 was entirely my own work, not from WHI!

On this occasion (not always!) I'm fully in agreement with Smithie6.

TST is a transformed company, with rising sales, profits, a £3m+ cash pile, new software and other products now commercialised, substantial recurring revenues, international sales prospects and a vision led by an experienced Chairman.

Plus a very positive outlook statement for this year.

The 7% sales increase last year is pretty creditable imo given the macro situation which left many, many companies issuing profit warnings.

Further, TST managed to raise margins such that PBT increased 60% and is expected to increase another 40% this year, to give a £1m PBT against an £8m m/cap.

TST are now on an ex-cash P/E of just 7.0 for this year. Jim Slater's PEG is only 0.48.

These indicate that TST is now on a bargain valuation.

[cocker] 12/3/2024 08:42

We can all see and most of us have read the WH Ireland update, unlike the unfactual Post that you have had to delete smudge. If you were that impressed and think the market should be aswell, why on earth are you and others not buying into this superstar AIM listed company?. Simply because its average and not much else. Also its worth noting that investors invest for returns, ie if there's decent amount of cash ,then give it to those who have backed you , like PLUS have done over many years, Inc buy backs. However, the latter serves no point when you can barely sell or buy a 1000 shares at anytime. Probably TST buying up the stock that's being sold into the market now, but not many left for them, so there's your chance Coco to impress us all!

[smithie6] 12/3/2024 08:11

Well done Touchstar.

A small British company that has been very well run imo in recent years & has impressive products & skills (especially impressive for such a small company).

For me, as a shareholder, 10/10.
And I wouldn't give 10/10 to the majority of UK listed companies.

And PBT is up 60% versus the previous year, which was up on the year before.

[rivaldo] 11/3/2024 23:02

Ian Martin has done a tremendous job in turning TST around. He's not the type to make outlandish statements. Yet today's outlook is reasoned and likely the most confident outlook shareholders here have seen for a long time.

One might conclude that perhaps he's in a position to know a little more about what's happening at TST than anyone else.....

"Ian Martin, Chairman, commented: "Touchstar entered 2024 in good shape. In the market sectors in which we operate activity continues, which gives reassurance for the outlook in 2024. The medium-term prospects for the company have improved. The team is now focussed on making such opportunity a reality, enabling a long term continuation of the positive trends in financial performance, building upon the solid platform we have developed and making Touchstar a better business."

[cocker] 11/3/2024 22:01

Looks like smudger has got the hump, or perhaps he read the TU with Rose tinted glasses on. Either way, I have been here for years and as much as covid de-railed us when we were looking sharp, if you deliver 7% growth when most other businesses have been flying, then at the very least you need to ask yourselves why. Also to be confident of 2024 when we are only barely 3 months in & possibly a lot of belt tightening ahead, says it all really., either slightly deluded or complacent imho.

[cocker] 11/3/2024 19:27

Unaudited revenue up 7% yoy, what's inflation again?. If it was such a good update why has the market not shot the share price north, because its nothing more than average, that's why!. As far as my holding goes, I'm sure the stock won't collapse as its doing just enough, but happy to sell into any strength and if you like you might just be able to add to yours through my generosity.

[cocker] 11/3/2024 18:04

Given inflation running high, T/O basically flat and yes eps will look good as buy back will window dress it. With regards to acquisitions, why are so many so obsessed with it? Clearly TST have excellent products and have the personel to install them, but I go back to the underlying problem that has been the elephant in the room for too many years, they don't have the right people selling them. I hold a considerable amount of stock and have decided to drip feed the sells as and when , started this morning with 5k at 98p and suspect it will be in small chunks over a long period of time.

[rivaldo] 11/3/2024 11:44

Agreed. I'd also prefer to go for acquisitions, although even small buybacks at this level should prove to be highly earnings-enhancing as TST grows.

WH ireland summarise today as follows FYI:

"Today’s full year trading update demonstrates the progress that has been made in the business, with the execution of Touchstar’s multi-year strategy coming to fruition in a material improvement in profitability in FY23.

While our forecasts imply further organic growth as the group continues on its trajectory towards higher margin software licence and recurring revenues, we also note the very healthy net cash position (making up ca. 39% of the market cap), which brings the potential for bolt-on acquisitions, value being realised through further share buybacks, and further internal investment opportunities.

With the shares currently trading on a FY 2024E EV/Revenue of just 0.6x, EV/EBITDA of 2.4x and PER of 10.8x, we continue to see significant upside for the shares. We see fair value for the shares at 140p (previously 120p), which would imply a FY 2024E EV/Revenue multiple of 1.0x."

[rivaldo] 11/3/2024 08:36

WH Ireland have raised their valuation for TST to 140p (from 120p).

They've also updated their numbers. They have £7.2m turnover for last year (up from £6.7m in 2022), rising to £8m this year and £8.5m next year.

They now forecast 7.6p EPS for last year (up from 6.6p in 2022), rising to 8.7p EPS this year and 10.0p EPS next year.

The cash pile is due to rise to £3.4m this year and £3.8m next year, with the dividend rising to 2p and then 2.5p.

With that cash pile now backing up almost 40% of the m/cap, for me it represents firstly a backstop in terms of NAV and share price downside, and secondly an opportunity as TST have stated that they wish to expand either or both internationally (via partnership) and by acquisition. So given that the cash pile puts TST in the position to do so this potential may well be recognised in the share price at some point by canny investors out there.

[adamb1978] 11/3/2024 08:17

It does look very cheap, and I own a handful, but only a handful, however the bear arguments include

- Sequential half yearly decline in turnover?
- Market doesnt appear to place any value in the cash balance (not just for TST, but looking at ex-cash PEs in my mind is theoretical rather than ever recognsied in share prices)
- illiquidity

Any guesses for FY24 turnover?
Thanks

[rivaldo] 11/3/2024 07:24

The 2023 trading update notes that PBT will be 60% up on last year at around £0.65m, so this and revenues will be just slightly behind forecasts - but EPS will be "well above" expectations due to a lower tax charge and the buybacks.

I'd guess EPS is likely to be around 7.5p.

The 2024 forecast is already 8.7p EPS, but this may be increased due to the buybacks.

The cash pile is steady at £3m - almost 40% of the m/cap. So the historic ex-cash P/E is only around 7.5.

Most importantly, the outlook for 2024 is extremely positive:

"Trading remains on track for 2024 to be a year of

· Further revenue growth
· Maintenance of healthy margins
· Positive cash generation
· Progress in profitability

Ian Martin, Chairman, commented: "Touchstar entered 2024 in good shape. In the market sectors in which we operate activity continues, which gives reassurance for the outlook in 2024. The medium-term prospects for the company have improved. The team is now focussed on making such opportunity a reality, enabling a long term continuation of the positive trends in financial performance, building upon the solid platform we have developed and making Touchstar a better business."

[smithie6] 10/3/2024 11:48

Not so easy to sell the hardware units directly imo. Clients probably mostly buy new hardware when they upgrade their whole system and that only happens every X years.

The hardware units/terminals should be with agents to try to obtain sales and I think the company is expanding that, including overseas, yes.
Strategy looks correct imo.

(Imo I'm amazed that such a small company can design, document, make & get certified (some terminals certified for use in explosive air vapour environments ) it's own terminals, since it is a big one-off cost.
I guess that the company has looked at options such as licensing their designs to hardware terminal companies & decided against it. If you give your designs out there are many risks of course such as not getting paid the correct licence fees, similar/copy designs being made which get around your licence fee & then undercut your price in your home market, ....or the designs getting to Asia & then being made much more cheapily & then undercutting your price in your home market.
The company will look at the different options every year, & have been doing so for years, & know much more about it than us, & I'm confident they are making the best/correct decisions.

Touchstar uses some units made by other companies in Touchstar systems (is Zebra one of them?), one hopes that those companies also buy some hardware units from Touchstar.