0R15 9025.0 0.0% 0R1E 9410.0 0.0% 0M69 None None% 0R2V 247.99 9682.643% 0QYR 1567.5 0.0% 0QYP 439.3701 -2.9016% 0RUK None None% 0RYA 1597.0 1.2682% 0RIH 195.55 0.0% 0RIH 191.4 -2.1222% 0R1O 225.5 9683.0803% 0R1O None None% 0QFP 10475.8496 107.8542% 0M2Z 252.573 0.2373% 0VSO 33.0 -7.3164% 0R1I None None% 0QZI 622.0 0.0% 0QZ0 220.0 0.0% 0NZF None None% 0YXG 222.05 -4.1318%
AB Dynamics PLC (LON: ABDP)
AB Dynamics PLC is an FTSE AIM All-Share Index listed Company founded in 1982 and headquartered in Bradford-on-Avon, the United Kingdom. The Company designs, manufactures, and supplies advanced testing systems and measurement products, catering to the needs of the global automotive market. Geographically, it operates in the United Kingdom, the European Union, North America and the Rest of the World. It is one of the most trusted global suppliers of products & services for the automotive test and verification sector. Also, the Company provides solutions to assist the automotive sector in enhancing safety and create a positive impact on the environment. Its customers include numerous global test facilities, Tier 1 suppliers, global vehicle manufacturers, and autonomous vehicle developers.
Recent trend of dividend payments
(Data Source: LSE Website, Research done by Kalkine Group)
The chart above demonstrates the consistent dividend payment done by ABDP from FY2017 to FY2020. In FY2021, ABDP paid an interim dividend of GBX 1.60 per share. It was paid on 14 May 2021 and had an ex-dividend date of 6 May 2021.
The UK Manufacturing Purchasing Managers Index (PMI)
In the latest release on 23 July 2021, the UK Purchasing Managers Index (PMI) for manufacturing had a reading of 60.4, which indicates expansion in the sector. Hence, ABDP could use this positive momentum to drive its growth.
Growth Prospects
Key Risks
Now we will analyse some key fundamental and shareholders statistics of AB Dynamics PLC.
Recent Development
Change in Director: On 1 July 2021, the Company announced that due to health reasons, Tony Best would step down from the non-executive Chairman role, and on his return, would be appointed as a Special Advisor to the Board. Richard Elsy would succeed him as a Non-Executive Director of the Group.
Financial and Operational Highlights (for the six months ended 28 February 2021 as of 28 April 2021)
(Source: LSE Website)
Financial Ratios (H1 FY2021)
Share Price Performance Analysis
(Source: Refinitiv, Research done by Kalkine Group)
On 27 July 2021, at 7:05 AM GMT, ABDP’s shares were trading at GBX 1,960.00, at par against the previous day closing price. Stock 52-week High and Low were GBX 2,470.00 and GBX 1,655.00, respectively.
On a daily chart, the momentum indicator RSI (14-period) is trading at ~33.87 level and moving towards the oversold zone, indicating the possibility of an upward movement. The stock price is sustaining between the middle and lower Bollinger bands. Hence, there could be an uptick in the stock price in the near term.
In the last five years, ABDP’s stock has delivered an excellent positive return of ~322.12%. Also, it has outperformed the FTSE AIM All-Share Automobiles and Parts index with a return of around 23.34% and the FTSE AIM All-Share index with a return of about 65.30%.
Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)
Business Outlook Scenario
ABDP delivered a resilient performance in H1 FY2021, with adjusted operating margin rising to 12.8% from 12.2% in FY2020. It had an improved order intake compared to H2 FY2020 with a positive book to bill ratio, which provides further confidence for H2 FY2021. ABDP has almost zero leverage, with a debt/equity ratio of 0.01x, indicating financial flexibility to raise further debt, if required, at a cheaper cost. This will help ABDP to significantly invest in its international expansion, innovation and new product development. The Company could benefit from its end-market growth prospects, continued investment in capability and capacity, the launch of new products and market-led innovation, acquisition of Vadotech Group and increasing global footprint going into H2 FY2021. The Company has a promising acquisition pipeline, which could drive further growth. Furthermore, long term structural and regulatory growth drivers in active safety and autonomous systems could enhance future growth prospects.
Considering the Company’s market-led innovation and product development, its increasingly global footprint & continued investments, the better profitability, liquidity and leverage position of the business than the industry, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on AB Dynamics Plc at the current price of GBX 1,960.00 (as on 27 July 2021 at 7:05 AM GMT), with lower-double digit upside potential based on 51.27x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).
*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.
*All forecasted figures and Peer information have been taken from Refinitiv.
*The dividend yield is subject to change as per the stock price movement.
*The reference data in this report has been partly sourced from Refinitiv.
Disclaimer
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
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