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Numis says pausing for breath on Softcat, downgrafes to 'hold'

By Alexander Bueso

Date: Tuesday 26 Oct 2021

Numis says pausing for breath on Softcat, downgrafes to 'hold'

(Sharecast News) - Analysts at Numis downgraded their recommendation for shares of Softcat from 'add' to 'hold' after the IT infrastructure provider delivered what they termed an in-line set of full-year results.
Nevertheless, they conceded that the company's dividend and cash position both came in ahead of estimates, as well as the continued strong growth in the mid-market and public sector segments.

Indeed, Numis revised its estimates for Softcat's total dividend per share by 20%, comprised of 10% growth in its ordinary EPS and a flat special dividend payout.

On the flip-side, the analysts noted that it was very difficult to quantify the impact that product shortages might have.

However, they added that "being one of the largest VAR in the UK means the group's scale and vendor relationships provide options when supply is constrained".

Changing hands on 32 times' the company's estimated EV/EBIT multiple for 2022, the shares were on a "well-deserved premium" rating "given its track record of growth and delivery".

"Whilst the pandemic has impacted the "smooth" progression of earnings, note that the FY19-22 EBIT CAGR is 12.2%.

"Given its significant market opportunity (c.20% share of wallet amongst its customers) and execution capabilities, which continue to broaden, we believe Softcat can deliver sustainable double-digit growth. With the shares at our TP, we pause for breath and move our rating to Hold from Add."

Numis's 2,000.0p target price for the shares was unchanged.


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