Andrews Sykes Group PLC (LON: ASY)

Andrews Sykes Group PLC is an FTSE AIM All-Share index listed Company focused on the sale and installation of a diverse range of equipment, including pumping, portable heating, air conditioning, drying and ventilation equipment. 

Recent trend of dividend payments

The Company had paid an interim dividend of 11.90 pence per share on 05 November 2021, while the ex-dividend date was 07 October 2021, nearly flat from the prior-year levels. Nevertheless, the Company had shown almost 94% growth for the total dividend paid during FY20 as compared to FY19 levels.

Growth Prospects

• Strong Liquidity: ASY has sufficient funds beyond May 2022 without renegotiating the bank facilities to pursue further growth opportunities.
• Key Strategic Decision: The procurement of a new, modern, and larger property in Glasgow following months of due diligence would strengthen the Company’s presence in Scotland.

Key Risks 

• UAE Business: The Khansaheb Sykes business had experienced a difficult trading environment because of the reduced demand during Ramadan. Moreover, the revenue for this division declined by around 28% during H1 FY21.
• UK GDP: The UK economy witnessed a disappointing GDP growth of around 0.1% during October 2021, less than the estimates.
• Omicron Variant: The Government-led restrictions under Plan B because of an increasing number of Covid-19 cases in the UK may adversely impact the UK Equities.
• Global Logistic Disruptions: The risk associated with single-source suppliers had increased and created a cost burden on the Company.

Now we will analyse some key fundamental and shareholders statistics of Andrews Sykes Group PLC.

Tristar Corporation is the most significant shareholder as it holds nearly 36.38 million shares as of 30 September 2021. 

H1 FY21 Financial Highlights (for the six months ended 30 June 2021 as of 27 September 2021)

(Source: LSE Website)

• Decent Revenue: The Company’s top-line revenue witnessed an increase of £2.2 million and was £35.7 million during H1 FY21.
• Increase in Net Funds: The net funds increased by £2.0 million from £7.7 million as of 31 December 2020 to £9.7 million as of 30 June 2021.
• Profitability: Profit after tax in the period was £6.2 million (H1 FY20: £6.1 million).

Financial Ratios (H1 FY21)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 10 December 2021, at 09:08 AM GMT, ASY’s shares were trading at GBX 494.00, up by around 2.92% against the previous day closing price. Stock 52-week High and Low were GBX 675.00 and GBX 450.00, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. 

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Business Outlook

The Company remained cash generative, profitable, and well-positioned financially to generate value for the shareholders. However, the trading performance of Khansaheb remained depressed compared to historical levels because of the Covid-19 pandemic. Notwithstanding, the demand in Europe and pumps business in the UK remained robust and above pre-pandemic levels. The management remained confident of accelerated recovery boosted by the global economic progress. However, ASY may show sizeable correction because of several factors such as rising inflation and the Omicron variant of coronavirus. Thus, it depends on the risk appetite of the investors to take a reasonable position in this Company.

Considering the marginal top-line business & bottom-line business growth, consistent dividend payments, strong liquidity profile & leverage position, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Andrews Sykes Group PLC at the current market price of GBX 494.00 (as on 10 December 2021 at 09:08 AM GMT), with lower-double digit upside potential based on 18.53x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

*The dividend yield is subject to change as per the stock price movement.

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