Citadel delivers strong growth in key market segments

By Trevor Hoey. Published at Aug 20, 2018, in Special Reports

Name: Citadel Group Limited (ASX:CGL)

Market Capitalisation: $334 million

Opening Share Price: $6.80

Citadel Group Limited (ASX:CGL) has delivered another record full year profit in fiscal 2018.

The net profit of $19.4 million represented earnings per share of 32.5 cents, implying growth of 35.4 cents compared with fiscal 2017.

This was slightly above consensus forecasts of 34.5 cents.

Management declared a final dividend of 9 cents, bringing the full year dividend to 13.8 cents, in line with consensus forecasts.

Record contract wins underpinned the result and extensions totalling $74 million were achieved across the group’s core market segments of national security, defence, e-health, government and tertiary education.

Citadel specialises in managing information in complex environments through integrating systems and people to provide information.

Revenues supported by long term contracts

The majority of Citadel’s revenues are derived from long term managed services and software-as-a-service solutions.

Having made investments to cloud-enable its software, the company sees itself as well positioned to scale these solutions and drive further growth.

This is particularly the case in relation to the Citadel Information Exchange (Citadel–IX) solution which, in less than 12 months, has seen 10 new clients signed up to long term contracts, and additionally generated more than $68 million in new SaaS opportunities.

However, this does remain a speculative stock and investors should seek professional financial advice if considering this stock for their portfolio.

While management didn’t provide quantitative guidance, it expects a record sales pipeline, a portfolio of top tier clients and scalable cloud enabled IT solutions to drive earnings in fiscal 2019 and beyond.

Consensus forecasts point to earnings per share of 34.1 cents in fiscal 2019, implying a PE multiple of circa 20, a significant discount to the industry group average of 29.

The consensus 12 month price target which was only updated a fortnight ago is $7.39

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