Edison Investment Research - AVESCO GROUP (AVGPF) Update: CTUS leading the way

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Edison Investment Research

Update: CTUS leading the way

Avesco reported FY14 results slightly ahead of our recently upgraded estimates, with Creative Technology US (CTUS) leading the way with its revenue up by 18% in buoyant markets. Avesco is much more streamlined post its recent restructuring and is achieving an impressive double-digit return on capital (11.9% in FY14). Solid cash flows underpin expectations of progressive dividend payouts despite our expected FY15e â€˜odd yearâ€™ dip in profits. The share price looks too low given the FY15e yield of 6.0% and NAV of 167p.

15/01/2015 5 EN

Underlying

AVESCO GROUP

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GB0000653229 United Kingdom

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Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

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Edison Investment Research

Olympic gold

Avesco’s trading update outlines continued strong trading over the summer at Creative Technology in the US and at the Rio Olympics and Paralympics. FY16 results (to end September) will be “comfortably” ahead of previous expectations. Positive momentum continues into FY17, when a good schedule of sporting and commercial events, along with currency benefit, will buoy what would normally have been a weaker, odd-numbered year. With a rising dividend and asset backing, the valuation multiple remains very modest, despite the increase in the share price on this news.

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Edison Investment Research

Outlook: Good projections

A good H116 from Creative Technology, particularly in the US, underpins our maintained profit forecast for the full year. Avescoâ€™s FY14 restructuring is clearly delivering on the promise to smooth results between odd and even years, while the recent sale of Fountain Studios has realised cash to pay down debt and increase targeted investment in equipment. With a progressive dividend, a discount to net assets and a very modest multiple, the group is an attractive and coherent investment proposition.

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Update: CTUS leading the way

Ford Equity International Rating and Forecast Report

Olympic gold

Outlook: Good projections

Information Services Corporation - Strong underlying growth, guidance reiterated

PVA TePla - Material matters

Zalaris - Continuing contract momentum in FY24

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