The US investment bank, which was appointed as the AIM-listed firm’s joint corporate broker alongside Numis in February 2018, recently initiated coverage on the e-learning services and technologies provider with a ‘buy’ rating and a 12-month price target of 113p. LTG shares currently change hands at 67p each.
In a note to clients, Goldman Sachs’ analysts said: “We see LTG as well positioned to benefit from structurally attractive growth in corporate learning, with scope for further bolt-on M&A, given the fragmented nature of the market.”
They pointed out that, after mapping out global education spend to 2030, they forecast a 5% compound average growth rate (CAGR) in global spend on corporate learning over 2018-2030, up from 2.1% CAGR in 2008-18, driven by a rise in automation requiring employees to obtain new skills.
The analysts said: “While lower costs have been the main reason for the shift to eLearning within the corporate world to date, we see the next wave of growth being driven by higher-value bespoke content, aided by more sophisticated HR tech systems.”
They added, in their view, LTG’s business portfolio “is well positioned to benefit from this inflection, given its bespoke content offering, which we see as a key differentiator vs. larger peers.”
The analysts said their sensitivity analysis suggests that levering up to 1.0x-1.5x for acquisitions could add around a 10%-30% uplift to LTG’s 2020 underlying earnings (EBITDA) - using an 8x-16x 2020E EV/EBITDA transaction
In 2019-23, the Goldman analysts forecast LTG to deliver 7% growth in organic revenue, 11% increases in adjusted operating profit and a 14% rise in earnings per share per annum.
They said that, given the scope for further bolt-on M&A deals, as implied by LTG’s strategy, they have factored in a 6p/share value from future acquisitions in their price target.