GlobalData PLC (LON: DATA) – Continued strong performance; full year outlook in-line with expectations.

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 includes 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. The Company renders its services through two service divisions, namely ‘Over a period of time’ and ‘Immediately on delivery’.

On 1 March 2021, the Company expects to provide the financial results for the year ending 31 December 2020.

(Source: Company Website)

Growth Prospects and Risk Assessment

GlobalData’s client portfolio is well-diversified globally, which put them in a position to generate significant market opportunities. The Company has a low variable cost and consistent fixed cost model that accelerates the potential of solid progressive EBITDA margin value of over 75% to 85%. Moreover, it provides services to diversified industries, which include Aerospace, Defense & Security, Banking & Payments, Consumer, Construction, Foodservice, Insurance, Mining, Pharmaceuticals, Technology and Retail, among others. It has integrated its innovative solutions, expert analysis, and unique data into one platform, which helps in providing Comparable, Consistent and Complete solutions. Moreover, it 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. Overall, the Company is confident towards its business model and management team to tackle the uncertain times created due to coronavirus pandemic.

However, Covid-19 pandemic has created unprecedented challenges and abnormal trading conditions. Moreover, the limited travel or gatherings have affected the events performance. Also, the business is exposed to unfavourable currency fluctuations. Similarly, interest rate volatility can impact the value of interest-bearing assets and liabilities. Adjacently, the Company debt level has increased recently, which can also create a liquidity risk. Further, the Group operates in highly competitive yet fragmented markets.

Industry Outlook Dynamics

According to the Business Research Company, the market size for the global database software market has grown around 10.6% between 2015 and 2019, to be valued nearly US$78,722.3 million. The market is projected to reach US$104,429.2 million by 2023, representing a CAGR of approximately 7.3% between 2019 to 2023. Factors that can support growth include technological advances, digitization, and economic growth. Contrarily, concerns pertinent to consumer reluctance and cyber security can negatively affect market growth.

 

Recent Developments

On 25 November 2020: The Company announced the appointment of J.P. Morgan as Nominated Adviser and  Panmure Gordon as Joint Broker, with immediate effect.

A Glimpse of Business Segments (H1 FY20)

Trading Update (for the 10 months to 31 October 2020, as on 25 November 2020)

• In the 10 months ended 31 October 2020, the revenue increased by 5% year-on-year (excluding events), due to an increase of 7% in subscription revenue. Overall, the Group’s revenue was flat as compared with the corresponding period of the last year.
• Despite the challenging macro environment, the forward contracted revenue surged by 8% year-on-year in the period.
• The Company witnessed a good momentum in sales order growth at the end of Q3 FY20 and the start of Q4 FY20.
• During the period, the adjusted EBITDA was up by 12% year-on-year, with an increase in the margin of 3 percentage points.
• Further, FY20 adjusted EBITDA is expected to be in line with the management expectations.
• The Company has shown a strong cash flow from operations, with net debt of £51.4 million as of October 2020.
• Overall, the full-year outlook was in-line with expectations.

Financial and Operational Highlights (for the six months ended 30 June 2020 (H1 FY20), as on 27 July 2020)

(Source: Company Website)

• H1 FY20 results witnessed a sustained performance across the subscription-based data and analytics business, due to growing demand for the trusted intelligence products.
• In H1 FY20, the subscription revenue increased by 7% (FY19: 10%), with a slight decrease in overall Group revenue of 2% year-on-year.
• The Company has shown an agile and resilient response to Covid-19 pandemic and was benefitted from recurring revenues, an advantage of the single product platform and central operating model.
• Led by improved performance at both operating profit and Adjusted EBITDA levels, the profit before tax for H1 FY20 has increased by 79% year-on-year.
• The Company has shown a strong balance sheet, with cash flow from operations of £41.1 million (increased by 18% year-on-year), £145.5 million of committed facility and a further £75 million uncommitted accordion facility.
• The Board announced an interim dividend per share of 5.4 pence, an increase of 8% year-on-year.
• DATA also witnessed strong renewal rates and a significant increase in content usage from clients.

Financial Ratios (H1 FY2020)

Share Price Performance Analysis

On 8 December 2020 (before the market close, at 8:35 AM GMT), GlobalData PLC shares were trading at GBX 1,460.00, down by 2.67% against the previous day closing price. Stock 52-week High was GBX 1,750.00 and Low of GBX 830.00, respectively.

From a technical perspective, 200-day SMA (1,412.22) and 200-day EMA (1,424.64) are reflecting an upward trend and upside potential. Also, 14-day RSI stood at around 20.23 (oversold zone), which is supporting the upside movement.

In the last one year, GlobalData’ stock price has delivered a positive return of ~ 26.96% return as compared to positive ~17.90% return of FTSE AIM 100 index and a negative ~8.63% return of FTSE All Share Media index, which shows that the stock has outperformed the benchmark sector and the index.

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

Business Outlook Scenario

GlobalData has continued to perform well as adjusted EBITDA was 12% up year-on-year for the 10 months to 31 October 2020, while the cash flow from operations was 8% up versus the previous period. The Board appeared confident to sustain the strong trading momentum in November and December, and thus, deliver a strong finish to the FY20 and start the FY21 with a significant percentage of annual revenues already secure. The full year Adjusted EBITDA for the current financial year is expected to be in line with the Board's expectations.

The global economic and political environment continues to be uncertain amid the contagion of Covid-19. However, the Company’s business model has the ability to generate sustainable returns. GlobalData’s client portfolio is well-diversified globally, which put them in a position to generate significant market opportunities. Its 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. 

Considering the continued strong performance, full-year outlook in-line with expectations, strong financial position, a robust balance sheet, decent operating & financial performance, sustainable level of cash generation capabilities, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on GlobalData Plc at the current price of GBX 1,460.00 (as on 8 December 2020, before the market close at 8:35 AM GMT), with lower-double digit upside potential based on 60.90x Price/NTM Earnings (approx.) on FY20E earnings per share (approx.). 

 

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

*Dividend Yield may vary as per the stock price movement.

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