23rd Feb 2024 11:55
(Alliance News) - Gamma Communications is set to benefit from the UK trailblazing ahead of Europe in terms of cloud communications penetration, Shore Capital research analysts Martin O'Sullivan and Chris Bottomley said Friday.
The London-based cloud communication services provider will be able to take advantage of increased demand for cloud communication with over 60,000 UK companies using Gamma's telephony systems, Shore said.
Shore initiated coverage of Gamma with a 'buy' rating.
"Increased demand for Cloud communications and UCaaS has created a significant market in the UK (over 60,000 UK companies use Gamma's telephony systems). Our checks suggest European countries are about seven years behind the UK in terms of penetration, but the same dynamics will win out over time. Together, Gamma's European markets represent an opportunity more than three times the size of that of the UK," Shore said.
For 2023, Shore expects Gamma to report 9.0% growth in revenue to GBP528.2 million from GBP484.6 million in 2022. This is anticipated to climb to GBP684.7 million by 2026, up 41% from 2022.
Shore Capital said: "One important area is Unified Communications as a Service (UCaaS), which brings together voice, text, video conferencing, document sharing, and more, in one place at a competitive cost. Here Gamma offers competitive solutions, using own-IP and third-party IP, that enable flexible and remote working across all business types and sizes.
"These, together with its MS Teams voice enablement solutions, suggest to us that Gamma has the breadth and depth of products and services to benefit significantly from the ongoing move to Cloud communications, aided by the upcoming forced migration to digital communications in the UK."
Adjusted pretax profit is expected to come in 11% higher at GBP97.7 million in 2023 from GBP87.8 million in 2022. By 2026, adjusted pretax profit of GBP126.4 million is anticipated, up 44% from 2022's level.
Shore expects Gamma to declare a total dividend of 17.1 pence for 2023, up 14% from 15.0p in 2022. This is expected to climb up to 25.3p in 2026, 69% higher than in 2022.
The company will release its 2023 results on March 25.
Gamma shares were 0.3% higher at 1,244.00 pence each on Friday around noon in London. They are 6.1% higher than a year ago and 50% higher than five years ago.
By Tom Budszus, Alliance News slot editor
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