IG Design Group PLC (IGR)

[WickedLester]

Here's a value play which is also attractive on a PSR basis.

https://www.thedesigngroup.com/about/

The company is currently struggling but the forecast for the next couple of years seems to be that they will manage to breakeven or thereabouts. The cause seems to be the ever more familiar rising costs and supply chain disruption. They hope, however, to restore margins to 5-6% by fy 2025.

https://www.investegate.co.uk/ig-design ... 00104498J/

What has piqued my interest and the reason I have started buying the shares is twofold.

Firstly the balance sheet. The market cap is less than £60m yet NTAV is $280m. I would hazard a guess that the intangibles may have some value as well as they are probably the design archive (although I haven't researched this). Even if you assume that the whole lease asset is worthless and the lease liability will have to be paid in full then net tangible assets are still around $195m so this is trading at a steep discount to net tangible assets. Net current assets are over $200m.

https://www.investegate.co.uk/ig-design ... 00101957T/

The second thing that makes this interesting to me is the psr ratio. This year the company expects to turnover $963m so if they really can restore this to health then a 5-6% profit margin on all of that would leave these looking dirt cheap.

The company veers between a substantial net cash to net debt position due to the seasonality but over the course of the year they tend to have a net debt position and due to the tough trading may have to renegotiate their covenants which is one red flag but it's one that i'm willing to live with.

All in all then I think it's a very attractive risk reward scenario. If they can restore margins in a few years time I don't think it's outrageous to suggest they could ten bag and if they don't I would hope that the balance sheet strength will mean there isn't too much more downside.

Anyone have a view?

[dealtn]

One I own also.

[abtan]

£IGR (I hold)

I completely agree on the thoughts above.

The balance sheet is very weak at the moment, but I imagine that the company will scrape through the current FY (ending March 2023), with customer orders/payments and logistical issues sorted out well in advance. The real upside should then come through in FY24.

The company was generating £17m of free cash before covid, since when it has made a large acquisition. The current market cap is £54m

Even on a low rating I would hope for a x2/x3 bagger in the next couple of years, though I have a secret hope for higher returns in a few years as performance exceeds pre-covid/pre March 2020-acquisition levels.

Cheers
A

[WickedLester]

I wouldn't agree that the balance sheet is very weak, they have substantial net tangible assets and net current assets, however I would agree that the debt position is a bit high for my liking and this is the main red flag which I considered before making an investment.