Investment Highlights

1. GlobalData delivered good results in FY2019 period, with decent operational performance, stable earnings growth, and robust free cash flow generation.

2. The company’s low variable cost and consistent fixed cost model accelerates the potential of solid progressive EBITDA margin value of over 75% to 85%.

3. GlobalData’s client portfolio is well-diversified globally, which put them in a position to generate significant market opportunities.

4. The group increased its total dividend payment significantly by 36 per cent for the period, with reduced net debt.

5. Delivered strong revenue growth with a decent operational performance for the current period.

6. The company provide its services to multiple industries, which include Aerospace, Defense & Security, Banking & Payments, Consumer, Construction, Foodservice, Insurance, Mining, Pharmaceuticals, Technology and Retail, etc.

7. The group provide industry professionals, government organisations and companies with faster capabilities tomake quick decisions.

8. GlobalData has integrated its innovative solutions, expert analysis and unique data into one platform, which helps in providing Comparable, Consistent and Complete solutions.

9. The group is confident towards its business model and management team to tackle the uncertain times created due to coronavirus pandemic.
 

Business Overview: GlobalData PLC (LON: DATA)

GlobalData PLC is a market data intelligence provider to the world’s renowned industries. It is listed on FTSE AIM 100 index of the London Stock Exchange. It has been serving over 4,000 clients, which include companies across various industries, financial institutions, government organizations and professional service firms. The Company intends to cater through long-term strategic partnerships through its “gold standard” offerings. GlobalData’s business model holds a recurring value as it generates 75% of revenue through subscriptions. It serves with around 3,355 employees to the digital community of approximately 28.5 million people.


(Source: Company Presentation)

Key Statistics



The group render its services through two service divisions:
 

1. Over a period of time

2. Immediately on delivery
 

While geographically, the company’s operations are organized predominantly into Europe, US and Asia Pacific. The geographic segment is breakdown into the following groups:
 

1. United Kingdom

2. Europe

3. Americas

4. Asia Pacific

5. MENA

6. Rest of World
 

The client usually subscribes its proprietary data, analytics, and insights for 12 months period, which is paid at the beginning of the term. Such an approach helps them to generate:
 

1. Recurring revenue stream through repeat subscription.

2. Solid incremental margins.

3. Robust operating cash flow and working capital.

4. Sizeable opportunities.
 

A Glance of Operational Milestones Achieved During FY2019

1. The GlobalData has transitioned into a single platform and centralized operating model.

2. The group also announced the major product updates, improver user-experience and enhanced site performance.

3. It has successfully launched new productized data, insights and analytics.

4. The group had made significant investments in technological advancement and upgrading core infrastructure.
 

Examples of Major Releases Delivered in 2019
 

1. Digital disruption by upgrading product that provides cross-industry data, analytics, and insights.

2. Maintaining a database of global patents.

3. Launched a Direct Data Services offering providing API and Feed based data consumption.

4. Flexible search capability across all the data portfolio.
 

Strategic Priorities for 2020
 

World-Class Product

1. The group is focusing on unlocking future value through its significant development in products.

2. Leveraging automation, predictive and prescriptive analytics over their data and insights to explore new opportunities.
 

Excellence in Sales
 

1. Right capacity and coverage model.

2. Ensuring the right number of sales forces in the right areas.

3. Widening sales in both regions and industries.

4. Introducing strict pricing policy.

5. Developing “Sales Best Practice Playbook” for standardization.
 

Client-Centric Approach

1. Enhanced focus on client retention and client satisfaction by providing them with a value at every interaction point.

2. Increased resources in the front line and exploring new technology to serve clients in new and better way.
 

Operational Agility

1. Achieving cost and margin advantage through the centralized operating model. Hence, it would help GlobalData in driving operational synergy by bringing agility and consistency into the system.

2. Creating synergy and centralization by leveraging the acquisitions made in the past.
 

Significant Updates of 2020

1. 27^th March 2020: GlobalData has scheduled the annual general meeting to be held through a conference call on 21^st April 2020.

2. 16^th January 2020: The group has announced that Graham Lilley would continue to serve as Company’s Chief Financial Officer (CFO), contrary to the previous announcement of the change in CFO in the first quarter of 2020.
 

Progress Against the Key Performing Indicators

During the year 2019, the revenue grew by 13% against FY2018 data, representing 7% organic growth. The group has been able to reduce the net debt, while maintaining incremental dividend policy and M&A activity. Moreover, the group has a relatively fixed cost base, which has assisted them in increasing their adjusted EBITDA margins.


(Source: Annual Report)

Top Shareholders
 
 
 

Financial Highlights - Decent Growth Trajectory in FY2019 (ended 31 December 2019)


(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, driven by organic revenue growth of revenue and positive impact of Foreign Exchange for the period, the revenue increased by 13 per cent to GBP 178,195 thousand as against GBP 157,553 thousand in FY2018. The invoiced forward revenues surged by 5 per cent from GBP 81.4 million in FY2018 to GBP 85.1 million in FY2019. Driven by the decline in the operating expenses for the period, the group reported an operating profit of GBP 13,589 thousand in FY2019 versus an operating loss of GBP 5,177 thousand in the financial year 2018. The adjusted EBITDA increased by 38 per cent to GBP 44.6 million in the financial year 2019 from GBP 32.2 million in the financial year 2018, reflecting an improvement in adjusted EBITDA margin of 25 per cent and stood ahead of expected values. The group’s PBT (profit before tax) from continuing operations stood at GBP 10,171 thousand in FY2019 versus an LBT (loss before tax) from continuing operations of GBP 7,664 thousand in FY2018, driven by strong growth of revenue and EBITDA. The Profit for the year stood at GBP 6,984 thousand in the financial year 2019 versus a loss for the year of GBP 12,327 thousand in FY2018. The basic earnings per share stood at 5.99 pence in FY2019 versus a basic loss per share of 11.31 pence in FY2018. The operating cash flow stood at GBP 52.4 million in FY2019 versus GBP 25.1 million in FY2018.

Financial Ratios

 

The reported EBITDA margin of 22.4 per cent for the FY2019 stood higher than the industry median of 17.2 per cent. The reported Pretax margin of 5.7 per cent for the FY2019 stood significantly higher than negative Pretax margin of 4.9 per cent in FY2018. Net margin reported was 3.9 per cent for the financial year 2019 stood higher than negative Net Margin of 7 per cent in FY2018. Return on equity for the Financial year 2019 stood at 4.6 per cent, which was higher than negative Return on equity of 9.5 per cent in FY2018. On the liquidity front, GlobalData Plc’s current ratio was lower than the industry median of 1.33, reflecting insufficient current assets to pay its short-term obligations. On leverage front, the debt-equity ratio of the GlobalData Plc’s was 0.73x, which was slightly lower as compared to the industry median of 0.74x.

Share Price Performance


Daily Chart as on 14th April 2020, before the market close (Source: Thomson Reuters)

On April 14, 2020, at the time of writing (before the market close, at 11:26 AM GMT), GlobalData Plc shares were trading at GBX 1,032.50, down by 3.05 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 1,420.00/GBX 580.00.

Bullish Technical Indicators

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further. Also, 14-day RSI is currently hovering near an oversold zone, which in turn has the potential to move the stock upwards.

Valuation Methodology

Method 1: Price/Book Value Approach (NTM)



To compare GlobalData Plc with its peers, Price/Book Value multiple has been used. The peers are Alpha Financial Markets Consulting Plc (NTM Price/Book Value was 44.60), RBG Holdings Plc (NTM Price/Book Value was 0.08), Gateley Holdings Plc (NTM Price/Book Value was 0.21), Ince Group Plc (NTM Price/Book Value was 0.45) and Avantium NV (NTM Price/Book Value was 1.09). The Average of Price/Book Value (NTM) of the company’s peers was 9.30x (approx.)

Method 2: Enterprise Value to Sales Approach (NTM)



To compare GlobalData Plc with its peers, EV/Sales multiple has been used. The peers are Chegg Inc (NTM EV/Sales was 11.62), Tristel Plc(NTM EV/Sales was 7.13), JTC Plc (NTM EV/Sales was 6.59), Aslakastleto Group Plc (NTM EV/Sales was 5.80) and Frontier IP Group Plc (NTM EV/Sales was 5.38). The Average of EV/Sales (NTM) of the company’s peers was 7.30x (approx.)

Valuation Metrics


(Source: London Stock Exchange)
 
This analysis is a useful technique to decompose the different drivers of ROE. It can be further examined through three financial metrics which are: net profit margin, asset turnover and financial leverage. This analysis helps to deduce whether the company’s profitability, use of debt or assets that’s driving ROE.

GlobalData Plc Vs FTSE AIM 100 Index (1 Year)


(Source: Thomson Reuters)

In the last year, GlobalData Plc share price has delivered 81.27 per cent returns as compared to negative 22.90 per cent returns of FTSE-AIM 100 index, which shows that the stock has outperformed the index during the last year.

GlobalData Plc Vs Industry Vs Sector - 2 Years

(Source: Thomson Reuters)

In the last two years, Global Data Plc’s share price increased by 77.5 per cent, while the performance of the industry declined by 4.86 per cent and the sector performance declined by 29.31 per cent.

Growth Prospects and Risk Assessment

The company keeps on launching new platforms and upgrade the old products and services to become one of the market leaders in the Media Sector. The company, through its wide-ranging scope, had accelerated growth organically and through acquisitions. The group is exposed to the effects of political and economic risks. Global political uncertainty regarding trade policy also poses a risk for the group, including protectionist measures and regulation or legislation in local markets.

Business Outlook Scenario

The company has shown an increase in financial performance in the financial year 2019. Both the top-line and the bottom-line performance has improved, with improved profitability margins for the period. The group also managed to control its operating expenses effectively for the period. The grouped entered into the financial year 2020 with strong momentum, increased revenue visibility, decent margins and cash conversion ability. The group remained confident about its management team and business model to face the uncertainty created due to Covid-19 outbreak.

The global economic and political environment continues to be uncertain amid the contagion of Covid-19. However, the company’s business model has an ability to generate sustainable returns. GlobalData’s client portfolio is well-diversified globally, which put them in a position to generate significant market opportunities. The company’s low variable cost and consistent fixed cost model accelerates the potential of solid progressive EBITDA margin value of over 75% to 85%.  Moreover, the GlobalData, as a data and analytics firm, has not been materially impacted by Brexit. M&A activity has played a significant role in their growth; hence, it is imperative to identify the current synergy value in advance, failure of which could lead to operational inefficiency. 

Over the course of 3 years (FY16 - FY19), the company’s revenue surged from GBP 100.00 million in FY16 to GBP 178.20 million in FY19. Compounded annual growth rate (CAGR) stood at 21.24 per cent.

Based on the decent prospects and support from the valuation as done using the above two methods, we have given a “SPECULATIVE BUY” recommendation at the current of GBX 1,032.50 (as on 14^th April 2020, before the market close at 10:55 AM GMT), with lower-double digit upside potential based on 9.30x Price/Book Value (approx.) on FY20E book value per share (approx.) and 7.30x NTM EV/Sales (approx.) on FY20E sales (approx.).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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