Broker snap: NCC offers assurance

5th Jul 2010 09:41

House broker Altium Securities has bumped up its price target for IT security assurance group NCC Group after a strong set of preliminary results."The outlook is very positive, reflected in the increased order book levels and the opportunity for further margin progression," Altium said in a broker note in which it reiterated its "buy" recommendation.The price target has been lifted from 485p to 500p to reflect the full uplift in profitability from the recent acquisitions.Those acquisitions, of Meridian and SDLC, have been working out very well, NCC chief executive officer (CEO) Rob Cotton told Sharecast.The company's management is constantly talking to companies it admires and expects to make one or two bolt-on acquisitions this year "as we have for the last four years, but we don't need to make acquisitions to keep growing," Cotton said.Altium notes that the management has expressed its intention to expand internationally. NCC CEO Cotton said that with the Obama administration set to introduce a higher level of capital gains tax a lot of US companies that are up for sale are "realigning their selling prices", and that the US is a place where the company is keen to increase scale."We expect this strategy of supplementing organic growth with acquisitions to continue to reap rewards for the group," Altium analyst Jon Fletcher said.KBC Peel Hunt is also a fan of the stock which it thinks is "too cheap on 11x PER [price/earnings ratio], 3.2% dividend yield and estimated FCF [free cash flow] yield of over 12%."Were the stock trading on the same PER as its sector its share price would be 560p, KBC analyst Alex Jarvis notes.Jarvis considers the stock's discount to its peers undeserved, "given the group's track record of organic growth, market positions and above average EBITA [earnings before interest, tax and amortisation] profile of over 25%.