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Lo-Q shares extend gains, Edison sees strong growth ahead

Published: 01:14 29 Mar 2012 AEDT

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Shares in virtual queuing specialist Lo-Q (LON:LOQ) extended gains today, following rises after an upbeat AGM statement yesterday.

By 3.12 pm, the stock was trading at 317.50 pence, up 4.3 per cent on the day. The group’s valuation has doubled since the same time last year.

Edison Investment Research put out a note today, saying that while the shares look pricey in traditional price/earnings ratio terms, there is plenty of momentum in the business, which is set to drive growth over the next few years.

Lo-Q is currently trading at 22 times earnings as forecast by Edison for the current year, expected to dip to 20 times FY2013 forecast earnings.

The group told shareholders yesterday that it has made an encouraging start to the new trading year.

Lo-Q said that while it is still very early in the trading year for the majority of its theme and water park customers, a healthy sales pipeline and encouraging early trading made it confident of hitting market expectations.

The company had a strong year to October 2011 with profits rising by 17 per cent to £2.7 million and Six Flags, its main customer, signing a six-year contract extension for its core product, the Q-bot.

Six Flags also agreed to put Lo-Q’s new water park product, the Q-band, into nine of its water parks.

Other major theme park customers include Parques Reunidos, Herschend Group and Merlin Entertainments.

The group added that its performance is traditionally significantly second-half weighted and this weighting will increase this year due to the investments made in supporting new products and new customer installations.

Edison analyst Richard Jeans is expecting revenues of £30.4 million and pre-tax profits of £3.3 million in the current full year and £34.1 million/£3.7 million next year.

“Our forecasts apply conservative assumptions to the existing and new business wins and there are several drivers for upgrades, including increased penetration rates, firmer pricing and new business potential in the existing target markets,” he said.

“Further, there is an opportunity to widen the group’s virtual-queuing IP into adjacent markets and the benefits from smart phone apps and cashless payments through the deal with MasterCard are yet to show through,” Jeans added.

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