8th Feb 2022 15:27
(Alliance News) - Irish stockbroker Davy thinks compatriot DCC PLC gets overlooked by investors.
That may be because the Dublin-based company works in the rather broad field of "sales, marketing and support services" and produces steady, almost boringly positive, results. It slipped into the FTSE 100 in 2015 with hardly anyone noticing.
But DCC started out back in 1976 in the entirely more racy business of venture capital before converting to an operating company in the 1990s. DCC stands for Development Capital Corp.
DCC now generates more than GBP13 billion in annual revenue and GBP365 million in pretax profit. It focuses on three sectors - energy, healthcare and technology. In energy, it has two divisions - DCC LPG and DCC Retail & Oil.
On Tuesday, DCC reported a "good trading performance "in the three months that ended December 31, its financial third quarter. Operating profit was in line with expectations and ahead of a year before. This was supported by acquisitions made in 2020.
Harking back to its venture capital days, DCC made an even bigger acquisition during the recent quarter, buying a US sales and distribution business. The deal valued Philadelphia-based Almo Corp at USD610 million on an enterprise basis, meaning including both equity and debt, and is DCC's largest acquisition to date.
DCC said the acquisition announced in December was a "major step" in the continuing expansion of its DCC Technology division in North America.
Including the purchase of Almo, DCC has committed GBP560 million to new acquisitions across Europe and North America since May last year, it said.
Closer to home, DCC in December completed the acquisition of Naturgy Ireland, a Dublin-based supplier of renewable power, natural gas and energy services to large commercial and industrial customers in Ireland.
Looking ahead, DCC said it continues to expect the financial year ending March 31 to be another year of strong operating profit growth, in line with current market consensus expectations.
"Despite a challenging macro backdrop across wholesale energy markets, labour, logistics and supply chains, DCC hasn't missed a beat," said analysts at Davy Research. "It has delivered an 'in-line' quarter and remains on track to deliver at least 5% organic operating profit growth this year."
The Irish broker said DCC remains "materially undervalued". Davy repeated its 'outperform' rating and GBP90 price target, 44% above its current level.
DCC was quoted at 6,238.00 pence Tuesday afternoon in London, down 3.4%. It is up 9.1% over the past 12 months.
Tom Waite; [email protected]
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