DX (Group) – positive Trading Update boosted Brokers Buy ratings with up to 57p Target Price, shares now 32p

This morning’s H2 Trading Update from DX (Group) (LON:DX.) reported that the delivery solutions business will show some 10% uplift in revenues to £470m (£428m).

The group’s brokers have both come out positive and have upped their estimates.

Performing up to Management expectations, the parcel freight, secure courier and logistic services business has seen its expansion strategy going according to plan.

In spite of the current economic headwinds, the group remains encouraged about its growth prospects, while the recent additional Tuffnells Parcels Express volumes secured will help to enhance profitability in the new financial year and beyond.

The financial year ended 1^st July 2023 is expected to generate strong cash flows and net cash up by 39% to £37.6m (£27.0m), which is slightly ahead of management’s target.

That boosted cash balance was after capital expenditure of £10.9m (£6.2m) and the payment of an interim dividend of £3.0m (nil). 

There will be a further update on trading with the full year results, due in early October.

Analyst Opinions – Target Prices 50p to 57p a share

Guy Hewett at finnCap has a Target Price of 57p on the group’s shares.

He is estimating that the year to 1^st July will see adjusted pre-tax profits of £26.0m (£20.3m), lifting earnings up to 3.8p (2.8p) and paying a 1.5p per share dividend (nil).

For the new year he sees £519.2m sales, £32.0m profits, 4.3p earnings and a 1.7p dividend.

Over at Liberum Capital analyst Gerald Khoo rates the shares as a Buy looking for 50p.

For the last year he has £26.7m profits, 3.4p earnings and also a 1.5p dividend.

The current year into 2024 could see £494m revenues, £33.1m profits, 4.0p earnings and a 1.7p dividend.

Conclusion – strong cash balance will fund further expansion

This expanding group’s strong cash balances are exemplary. Its will certainly give it a good pillow against any further ‘headwinds’, especially as its beds down on the agreement to take over 15 former Tuffnells Parcels Express depots and to take on volumes from former Tuffnells customers.

The group’s continued success is built upon its consistent high customer service levels, there is no reason to expect that to change going forward.

The shares of this £196m capitalised company, at just 32p and on 8.4 times historic PE and near 5% yield, offer a very attractive upside.