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Optimism running high at ID security business

GB Group (GBG:AIM) 284p

Gain to date: 12.3%

Original entry point: Buy at 253p, 27 Oct 2016


Our GB Group (GBG:AIM) idea was always about getting in on a typically high quality company trading at an historically low valuation.

Slowing growth was the reason behind this anomaly and half year results on 29 November reflect that situation. Revenue increased 16% to £37.5m, 9% of that organically, playing through to a 15% rise in adjusted operating profit of £5.2m. You have to wonder how many other companies would be chuffed to bits with 9% organic growth but for GB this is a slow period.

GI update GB 151216

Importantly, management appear very optimistic of a big second half performance recovery backed by recent changes in the US and European political landscape. These present new commercial opportunities in areas such as border control, anti-terrorism, fraud prevention and corporate data security.

It’s worth noting that investment bank Berenberg recently initiated on the stock with a 340p price target, roughly in line with the 350p we originally suggested. ‘We believe GB’s double-digit organic growth outlook remains robust,’ Berenberg’s analysts say, going on to stress their view that the magnitude of the sell-off was unjustified.

This is the very argument we used and the 12% gain since then bears this out. (SF)

Keep buying.

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