Insider: these AIM bosses bet big on digital ecommerce boom

6th December 2021 08:40

by Graeme Evans from interactive investor

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Top brass think a mega deal will transform this AIM company, while chiefs at another junior stock spot a bargain.

Four directors at leading AIM stock GB Group (LSE:GBG) have bought shares worth £300,000 after the digital identity specialist sealed a major deal to expand in the US market.

The Company of the Year in the 2020 AIM Awards believes the £547 million swoop for Los Angeles-based Acuant, an ID verification and fraud prevention business, has the potential to accelerate its strategic progress by two years.

The deal has been part funded through a £300 million City fundraising, which took place in mid-November when shares were placed at 725p for a discount at the time of 17%.

The stock closed last week at 735p, even though interims on Tuesday highlighted progress in three core areas spanning digital identity, address verification and fraud prevention.

Chief executive Chris Clark stuck by full-year expectations and highlighted the company's “significant” growth drivers, particularly in identity fraud after the completion of the Acuant acquisition earlier in the week.

In the wake of the results, long-serving chairman David Rasche, chief financial officer David Ward and managing director Nick Brown acquired a combined £272,000 worth of GB shares at a price of 789.36p.

Non-executive director Liz Catchpole also spent £29,500 at a price of 780p on Wednesday.

The stock topped 950p in September after the Covid-19 pandemic created a digital ecommerce boom that accelerated long-term trends for the know-your-customer onboarding specialist.

About half of all consumers opened a new digital shopping account in 2020 and many said they were likely to go cashless due to Covid-19, creating much greater need for digital identity insight. Use of GB's software on Black Friday in 2020 was 47% higher than a year earlier.

The surge in cryptocurrency transaction volumes also provided a major boost to activity, particularly against the background of tighter anti-money laundering regulations.

The identity division now accounts for more than half of revenues, with recent customers including London-based fintech Zilch Technologies and Michigan-based retail chain Meijer.

New contracts in the location division have included with Nestle in the foods sector, GoPro and Garmin in technology retail and Harper Collins in publishing.

Across the three divisions, constant currency revenues grew by 12.6% to £108.7 million and adjusted operating profits rose by 3.5% to £27.8 million.

GB joined London's main market in 1995 and switched to AIM in 2010, when it was valued at £22.2 million. It is now worth £1.8 billion and the eleventh largest stock in the junior market, having grown into a business with 20,000 customers and more than 1,200 staff.

GB's shares trade on 27 times 2022 earnings but house broker Peel Hunt notes that this is below the wider global tech sector on 34 times.

The City firm, which has price target of 1,075p, said: “We believe the upside risks to numbers will catalyse a re-rating in the months to come. Comfort around Acuant's near-term upside is likely to accelerate that.”

In the interim results, GB said Acuant should be earnings neutral in its first full year of ownership and accretive after that. The US firm grew by 22% in the year to September.

Clark, who has been chief executive since 2017, added last week: “The combination of our two businesses is a complementary and powerful one.

“We are creating a global leader in identity verification as well as strengthening our capability to capitalise on the adjacent, emerging and fast growing identify fraud market.

Bouncing back after director deals

Fellow AIM stock D4t4 Solutions (LSE:D4T4) finished 10% higher on Friday, with sentiment aided by the disclosure that the top two directors had spent £85,000 on boosting their holdings.

Shares closed the week at 305p after new chief executive Bill Bruno and chief financial officer Ash Mehta bought at prices between 285p and 290p on Friday morning.

Known as IS Solutions between 1985 and 2015, the company and its Celebrus suite of products enable customers to generate value from their data assets. The business has undergone a period of strategic change, with a boardroom overhaul and the targeting of a major new market opportunity through the Celebrus fraud data platform.

The shares had been 326p at the start of last week but fell as low as 276p in the aftermath of half-year results showing a modest return to the black in the six months to 30 September.

Bruno, who joined the company in 2018 and became chief executive in October, stuck by expectations for the rest of the year and also announced plans to pay a 4.9% higher interim dividend of 0.85p a share on 10 January.

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