Auction Technology Group performing well but improvements needed, says RBC

RBC Capital Markets has trimmed its target price for Auction Technology Group (ATG) and kept a 'sector perform' stance on the stock, saying that it needs to see evidence of improving market conditions before turning more positive.

In a trading update for the financial year ended 30 September, the online auction marketplace operator said annual revenues would likely rise 5% to $174m. Back in May at the time of its interim results, the company said it was expecting revenues in the range of $175-180m, targeting revenue growth of 7% at the mid-point of the range.

ATG also said that adjusted EBITDA margins would be between 45% and 46% for the year, marginally lower than earlier guidance of 46%.

Nevertheless, RBC said that the update was "a relief to many", with the company still able to grow on an organic basis, which speaks to the "resilience of the model and importance of continued growth in value added services".

However, due to continued soft underlying markets, the broker cut its growth forecasts for the next two years, and reduced its target price for the shares from 540p to 520p.

"ATG is operating in difficult end markets, which are yet to turn the corner," RBC said, adding that it is waiting on more data from the company's annual results next month to assess the evolution of market conditions.

"To become more bullish, we are looking to see at least one of green shoots in end markets, or positive trends in conversion rate," RBC said.

The stock was up 0.1% at 435.5p by 1153 BST, having jumped 6% the previous session.