Shares in quality companies often carry a hefty price tag. That's not the case with Vislink, which specialises in transmitting live, high-definition video and audio from the football pitch to the broadcast studio or from police helmets to helicopters flying overhead. The group - which supplies the likes of Sky and Disney - has partnered with industry leaders Harmonic and GoPro and boosted its prospects through acquisitions, yet its shares are rated at a discount to peers.
- Strong sales and profit growth
- GoPro and Harmonic partnerships
- Exposed to fast-growing markets
- Contentious share-award scheme
- Tepid broadcast sales in 2014
Vislink has historically provided wireless cameras, amplifiers and satellite communications to customers in broadcasting, public safety and surveillance. But it has boosted its growth prospects by diversifying its product range and shifting towards more lucrative software and security revenues. A contract with the Home Office has lifted revenues, but the tipping point was the group's takeover of Pebble Beach, which provides higher-margin automation software and content management services to television broadcasters and cable and satellite operators. Pebble Beach contributed 46 per cent of Vislink's adjusted operating profit in 2014, and helped widen the group's gross margin by 5.2 percentage points to 45.9 per cent.
Recent partnerships promise to spur further gains. For example, Vislink agreed to let Harmonic (US: HLIT) sell bundles of its video delivery technology and Pebble Beach software to international broadcasters; Harmonic placed an initial order of £2m. The group is also working with GoPro (US: GPRO), a specialist in wearable cameras, to build a transmitter that can be worn or mounted at live sports and other events to provide new perspectives. GoPro's HERO4 cameras will use Vislink's technology to wirelessly transmit live, high-quality video. GoPro grew camera shipments by 93 per cent to 1.6m in the second quarter of 2015, so the deal could pay off handsomely.
Vislink has registered more than 90 joint deals with Harmonic and amassed over 700 leads for its joint product with GoPro. New products, such as the HDR-5000 receiver - which enables seamless, wide-area video transmission from aircfraft - and a 2.4m antenna for Vislink's vehicle-mounted systems promise to drive further progress.
The group's robust prospects underpin broker N+1 Singer's expected 5 per cent rise in cash profit to £10.7m in 2015, followed by a 6 per cent increase in 2016. Vislink's shares have climbed in recent months, but still trade at an enticing 12 times forecast earnings for 2015, falling to 11 times for 2016.
One concern may be tepid trading in the Americas, the Middle East and Africa, which precipitated a sharp decline in broadcasting sales in 2014. But analysts expect the US Presidential elections and next year's Olympic Games to spur investment in broadcast and public-safety equipment, offsetting any regional weaknesses. A controversial share-incentive scheme has also clouded the picture. This scheme links rewards for executives solely to Vislink's share price performance, a metric that could give executives a free lunch.
| VISLINK (VLK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 54p | MARKET VALUE: | £66.2m | |
| TOUCH: | 53-54p | 12-MONTH HIGH: | 61p | LOW: 34p |
| FORWARD DIVIDEND YIELD: | 2.8% | FORWARD PE RATIO: | 11 | |
| NET ASSET VALUE: | 46p* | NET CASH: | £0.4m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 57.2 | 3.1 | 2.5 | 1.3 |
| 2013 | 59.9 | 4.4 | 4.1 | 1.3 |
| 2014 | 61.9 | 7.1 | 4.1 | 1.5 |
| 2015† | 63.7 | 7.7 | 4.5 | 1.5 |
| 2016† | 67.2 | 8.4 | 4.9 | 1.5 |
| % change | +5 | +9 | +9 | nil |
Normal market size: 7,500 Market makers: 6 Beta: 0.2 *Includes intangible assets of £43.7m, or 36p a share †N+1 Singer forecasts, adjusted PTP and EPS figures | ||||
