Gattaca (LON:GATC) was pitched to the Stockopedia Investment Club on 2nd of February 2021.

Markets are buoyant right now and vaccine rollouts mean investors, while mindful of ongoing Covid-19 risks, are also looking towards the potential 'reopening' of the economy.

Andy Haldane (the Bank of England's Chief Economist) says the UK economy is poised like a 'coiled-spring' due to pent-up demand, high consumer savings, and the restarting of delayed projects.

There's a chance we're in for a rehiring boom once conditions normalise, and Gattaca, with its STEM focus, is well placed to capitalise on this recovery scenario. What's more, modest cash flow multiples and an enterprise value of just £13m appear to offer a margin of safety here.

But are we jumping the gun with a 'recovery' pitch? And is Gattaca the way to play it?

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Summary

Bull points: Cash rich and low enterprise value in a depressed, cyclical sector; specialises in 'in-demand' areas of talent (technology and engineering); operational progress has been masked by the pandemic; well placed to participate in an economic recovery; 25% owned by founder

Bear points: Uncertainty over potential DOJ fine; The risk of a prolonged economic recession; volatile operating results


Profile

Gattaca is a recruiter in the Industrials sector listed under the Professional & Commercial Services industry group. It has a market cap of £33m and an enterprise value of just £13.3m. After a steep drop from 85p to 29p in the early throes of the Covid pandemic, shares have now rebounded to a 52-week high of 104.25p.

The company specialises in Science, Technology, Engineering and Maths (STEM) recruitment. Matchtech’s share of the engineering recruitment market is estimated at around 5%. Gattaca aims to replicate this internationally, across all the sectors it currently operate in.

Its services include:

  • Traditional staffing,
  • Packaged campaigns (a higher-touch, more value-added recruitment campaign service),
  • Market insight reporting,
  • Workforce solutions,
  • Engineering and technology projects, and
  • Talent attraction and employer branding.

The small enterprise value means Gattaca can be viewed as a deep value investment, with an EV of £13.3m but FY20 net fee income of some £54.3m. The spread is 588bps and the EMS is 8,000, so trading costs and liquidity are factors.

Gattaca has strong Ranks across the board and a 99 StockRank, meaning it qualifies as a Micro Cap

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