Citadel Group (ASX: CGL) is a leader in the development and delivery of managed service solutions to a range of government departments and private sector businesses. We believe CGL’s competitive edge is their expertise and deep experience in ‘managing knowledge in complex environments through integrating know-how, systems and people to provide information on an anywhere-anytime basis.’ The majority of CGL’s revenues are derived from long term managed services, software-as-a-service and high quality strategic advisory services.
With all key technology contracts locked in for FY2018, we believe CGL is well placed to drive further earnings growth in the year ahead. To date, CGL has not lost a contract & management has consistently expressed confidence in renewal of all key contracts over the coming 2 years.
Specific to the outlook, management appear confident in achieving further significant growth in earnings and profitability in the coming year/s. Chairman Kevin McCann noted “There are many opportunities to continue growing Citadel’s businesses in both public and private markets, particularly with Citadel’s unique technology and health offerings. Growth will be organic and from selected merger and acquisition opportunities.”
Our valuation reflects the generally positive outlook, with profit and profitability forecast to continue improving over the medium term. At current market prices, we believe CGL trades at a modest discount to intrinsic value. Due to the nature of its business and business relationships, we believe Citadel Group’s strategic growth plans can be achieved with little dependence on the broader economic environment.
