- 2023 guidance maintained
- £4mn of new contract wins
London-based social and digital media group Brave Bison (BBSN:1.78p) has announced three multi-million contract wins including two new customer accounts.
Importantly, the awards increase the marketing group's certainty of achieving full-year earnings guidance. House broker Cavendish forecasts 19 per cent growth in full-year pre-tax profit to £3.1mn on 11 per cent higher revenue of £35.2mn. On this basis, expect flat earnings per share (EPS) of 0.23p due to the higher share count resulting from the £4.75mn placing that funded this year's acquisition of SocialChain, a leading social media marketing agency.
Moreover, buoyed by the forecasted free cash flow of £1.5mn, analysts expect closing net cash of £6.3mn (0.5p) at the year-end, or a third of Brave Bison’s current market capitalisation. This implies the shares are priced on a prospected price/earnings (PE) ratio of 7.7 and a cash-adjusted PE ratio of 5.6, ratings that are out of line with the resilient trading performance even in a more challenging macroeconomic environment.
The two new account wins are with a Finnish homeware retailer and Dutch car parts retailer, both of which are generating annual revenue of more than $1bn. The contracts are worth £1mn each across the 2023 and 2024 financial years. In addition, Brave Bison has been awarded a two-year contract extension with a national electrical retailer which will generate a further £2mn of revenue. As noted at the interim results, SocialChain has been winning new business, too, adding £2mn of annualised revenue in the first half of 2023 from brands including Holland & Barrett, Aer Lingus and Pinterest. The ongoing contract momentum aside, there is potential for Brave Bison to deploy its cash pile on earnings accretive acquisitions, too.
So, although the share price has fallen back to my entry point (‘Alpha Research: A social marketing profit play for the digital age’, 10 May 2022), I feel there is scope for a far higher rating. Clearly, finance director Philippa Norridge is of the same opinion, having recently spent £50,000 purchasing 0.3mn shares at a price of 1.64p each. Buy.
■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com at £16.95 each plus P&P of £4.95, or £25 plus P&P of £5.75 for both books.
