Free share tips posted weekly! This week’s free share tip is K3 Capital Group (K3C).
AIM-listed K3 Capital Group is due to announce results for the year ended 31 May 2021 on 1 November. At the time this date was announced the company noted that following a review of its accounting policies, revenue and adjusted EBITDA for the year will be ahead of previous expectations. A trading update on 15 June stated revenue of approximately £46m and adjusted EBITDA of not less than £14.25m were anticipated for the financial year so these figures are almost certain to be beaten. The shares have never reached 400p but this level could soon be within striking distance and a positive reaction to the results may even see new highs reached in the coming weeks.
The company is a multi-disciplinary professional services firm operating both in the UK and overseas, providing advisory services to SMEs. K3 M&A Advisory Group covers company sales, brokerage and corporate finance services to SMEs looking to achieve full or partial exit as well as advice to a range of different types of acquirors. Strategic advice and valuations, financial due diligence and debt advice are also offered. K3 Tax Advisory Group provides two types of services. Research & Development tax credit advisory covers advice on Research and Development Tax Credit claims and Intax covers tax investigations relating to tax fraud, tax avoidance, disclosures and COP9 related work. K3 Restructuring Advisory Group provides a range of services including restructuring advisory, financial advisory, creditor services and forensic accounting as well as expert witness.
In July £10m before expenses was raised at a price of 340p per share to part finance the acquisitions of Knight Corporate Finance Group Limited and Knight R&D Limited. The placing price represented a slight premium to the closing price on 6 July, the last trading day before the proposed acquisitions and placing were announced. This suggests that there is strong support from key shareholders and the fact that the current price is close to the placing price, more than three months later, also indicates that now should be a good time to invest.
The company completed a number of acquisitions during its last financial year including randd, Quantuma, Intax, Aspect Plus and Alchemy Cayman. Although there should be ongoing organic growth, we see further acquisitions as playing an important part in adding shareholder value. The positive momentum built has continued into the current financial year, with trading in line with market consensus. Although the shares do not look particularly cheap based on historic financial performance, we believe that there is scope for sustained growth in the coming years. Acquisitions should drive value into the business and with this particularly in mind we put forward a SPECULATIVE BUY rating.
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