Companies: TIK   

Tikit Group, the supplier of IT services and software to the legal and accountancy sectors, has been a member of TheWrongPrice.com portfolio for three years. Back in May 2005, we thought the group’s shares were worth buying at 175.5p, so investors who backed our tip have enjoyed a 64 per cent increase in the share price as well as dividend payouts amounting to 11.5p – making for a total return of 70.6 per cent.

But Tikit’s shares have been much higher since we first backed them; they reached a peak of 346p last July. And we think the shares can get back up to that level and beyond.

The group’s focus on the niche markets of large law firms and accountancy practices means it has built up specific knowledge about these sectors, which gives it an undoubted advantage over competing IT consultancies that operate in a variety of sectors.

Meanwhile, Tikit’s addressable market is much greater than the group’s revenues. For example, the top 100 law firms in the UK spent £500 million on IT products and services in 2007, while the group’s turnover was just £26.4 million. So there is plenty of room for it to grow its sales further.

And those sales are indeed continuing to grow. Towards the end of April, Tikit confirmed that it had had an encouraging start to the year, with business activity levels remaining high.

Broker forecasts indicate that earnings per share are set to come in at 24.1p this year, which means that the group’s shares are currently trading at 12 times prospective EPS – low for a fast-growing software and IT services business. Next year, EPS is set to increase by a further 18.5 per cent to 28.6p. Dividend payouts of 6p and 7.1p per share are also forecast for this year and next. Buy.

Tikit	AIM	£22.66m	156.50p	3.50p
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Other company articles:
Tikit Group			14/08/2008
Tikit Group			13/05/2008
Tikit in line with expectations			18/01/2008
Tikit takes a hit			14/09/2007
Tikit			11/09/2007