Investment analysts at Berenberg Bank have placed Barco, the imaging technology business best known for its cinema projectors and ClickShare meeting room technology, as one of its 2022 Top Pick businesses. Barco is trading at half the price it did pre-pandemic, despite a long-term outlook that is more attractive than at that point, suggests the bank.
The bank says, in a nutshell, that Barco serves three main end-markets – entertainment, enterprise and healthcare. The business had staged a turnaround since new management joined in 2016, with significant margin improvement followed by a return to top-line growth. However, the pandemic has had a significant impact on its clients in the Entertainment and Enterprise divisions, with cinema and events companies reducing their investment in new equipment, and corporate customers unable to purchase equipment given lockdowns.
“Despite the short-term disruption, we believe that the resulting share price weakness offers an attractive long-term opportunity given the enhanced but delayed entertainment-related thesis, a new ClickShare product that will benefit from growth in the video conferencing usage and ongoing growth in the Healthcare business. Barco is one of our top picks.”
“Looking back at 2021: 2021 was a difficult year for Barco,” says Berenberg. “Despite a weak comparison base from the pandemic-affected 2020, revenue will have grown by no more than a mid-single-digit percentage. On top of this, the CEO’s departure and his replacement with two co-CEOs, one of which being the ex-chairperson and main shareholder, appeared initially unnecessary, unconvincing and raised corporate governance concerns. However, we acknowledge the clear delineation of responsibilities between the co-CEOs and can appreciate the skills that each of them offers the group. The new management team also announced a reorganisation of the group, removing the matrix organisation that it believed was slowing down decision-making and reducing internal accountability.”
Berenberg looks at what to expect from 2022, saying: “Our interactions with management towards the end of 2021 left us convinced that the longer-term outlook for Barco remains as strong as ever. However, 2022 will likely represent yet another transition year, especially given the rapid spread of Omicron that risks further delaying the return of investment from the group’s Entertainment and ClickShare customers. Despite this, we note the strong growth in the group’s order book, which increased by 45 per cent yoy after 9M 2021. This suggests that underlying demand remains strong and that once this order intake is converted to revenue, growth in 2022 has the ability to outperform our estimates.”