Opening a new chapter
​A lot can happen in 1 ½ weeks. Firstly on the 12th October, Vislink announced that its broadcast software arm, Pebble Beach Systems (PBS), had traded strongly – reporting H1 order intake up 53% LFL. Then the following day, Finance Director (Ian Davies) resigned with immediate effect due to personal health-related reasons, with the shares hitting an all-time low of 8p.
Finally the stock has almost doubled to 15.5p over the past 2 days, on the back of positive news that the Board has conditionally agreed to dispose of its hardware division, Vislink Communication Systems (VCS), to xG Technology Inc (Nasdaq: XGTI) for $16m (or c. £13m gross, representing 0.4x 2016 sales).
The transaction is subject to shareholder approval (date to be confirmed), and if authorised as anticipated, should close by the end of 2016. Proceeds (say £12m net) have been ear-marked to pay back the vast majority of the company’s £15m revolving credit facility with Santander - thus leaving the business “substantially debt-freeâ€.
On this basis we have upgraded our adjusted PBT forecasts for next year from £1.7m to £2.8m - delivering EPS of 1.8p on top of a re-introduced 0.4p dividend. Likewise our price target increases from 20p to 23p per share – equating to a 2017 sales multiple for PBS of 2.3x, and within the typical range of 2x-3x for smallcap software stocks.
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