GlobalData PLC (LON: DATA) – Continued Investment in Growth Optimisation Plan

GlobalData PLC is a market data intelligence and consulting service provider to the world’s renowned industries. Listed on the FTSE AIM All-Share index, the Company is headquartered in London, United Kingdom. It was founded in 2016. It has been serving over 4,000 clients, which includes companies across various industries, financial institutions, government organisations and professional service firms. The Company serves industries such as technology, retail, financial services, healthcare etc. GlobalData’s business model holds a recurring value as it generates around 83% of revenue through subscriptions as of FY2020. The Company also offers services in performance advertising. DATA has achieved solid progress in its product and platform. 

Recent trend of dividend payments – DATA declared a final dividend of GBX 11.60 per share for FY2020 on 1 March 2021 with an ex-dividend date of 25 March 2021. The dividend was paid on 23 April 2021. Previously, the Company had paid an interim dividend of GBX 5.40 per share for FY2020.

Growth Drivers

• Diversified client portfolio: GlobalData Plc has a well-diversified global client portfolio from various industries. It puts them in a position to generate significant market opportunities and still drive the overall demand when demand from specific end markets is low.
• Client centricity: GlobalData Plc uses an in-product customer engagement tool to run campaigns for its Intelligence Centre users so that they use specific product features. Such campaigns lead to a rise in the usage of features within a short period. Also, DATA increased the headcount across its customer success teams by almost 100% to fulfil its strategy of client centricity.
• Agile operations: The Company has extremely agile operations, which helped it to adapt to Covid-19 working conditions with no material additional costs. The Company is making strides in executing the TechFirst programme and digital workplace strategy to help all teams work efficiently.
• Excellence in sales: The Company in FY2020 invested in creating a best practice sales enablement capability. The Company also recruited new commercial leadership across its various sales teams. There is also a conversation intelligence platform, which analyses client calls and meetings in real-time to identify customer and competitor insights.
• Product excellence: GlobalData Plc has ‘Gold Standard’ capabilities across its products and is committed to creating a world-class user experience. These lead to subscription renewals. In FY2020, DATA invested significantly in its platform with new analytics and workflow tools.

Key Risks 

• Quality and relevance of products: The success of the Company depends on the quality and relevance of its products. The content must be of the highest quality to contribute to the client’s success. Loss of quality could lead to a loss of reputation as well as the impact on margins.
• Competitive environment: The Company operates in a fragmented and highly competitive market. Hence, competitive threats could lead to a loss of market share.
• Economic and global political changes: There could be a fall or delay in client spending for DATA’s offerings due to political or economic uncertainty, leading to an impact on margins.
• Evolving customer needs: Customer needs are continuously evolving, and customers are gradually becoming more empowered. So the Company needs to continuously adapt itself to its customers’ needs.
• Financial risk: Given that GlobalData Plc has significant international operations, fluctuations in currency exchange rates could impact DATA’s financials.
  

Now, we will analyse some key fundamental and shareholders statistics of GlobalData PLC.

Recent Development 

Change in Board: On 24 June 2021, DATA announced that Elizabeth Pritchard would step down as Non-Executive Director with immediate effect since she had been appointed as Chief Executive Officer of Bitvore Corporation.

Five months to 31 May 2021 Trading Update (released on 2 July 2021)

(Source: Company Website)

• Driven by a dramatic surge of ~600% in the administrative income and a ~7.1% rise in dividends received from group undertakings in the first five months of FY2021, profit before tax rose 5.4%.
• The improvement in profitability also led to a £0.3 million increase in cash and cash equivalents in the first five months of FY2021.
• DATA reduced its merger reserve and other reserves by a total of £171.0 million after it passed special resolutions at the Annual General Meeting.
• The capital reduction did not lead to any distribution of capital by DATA. It would not result in any changes to DATA’s dividend policy.

Financial and Operational Highlights (for the year ended 31 December 2020 as of 1 March 2021)

(Source: LSE Website)

• Driven by the subscription revenue up 7% YoY but offset by Covid-19 induced fall in event revenue by ~53% YoY, overall revenue in FY2020 remained in line with FY2019 revenue.
• Due to DATA’s cost control measures and stable cost base, adjusted EBITDA in FY2020 was up 14% YoY despite almost no increase in revenue.
• It also resulted in adjusted EPS surging 9% YoY in FY2020.
• The Company’s cash-accretive operations led to cash generated from continuing operations surging 13% YoY in FY2020.
• Due to solid cash generation, DATA offered a final dividend of GBX 11.60 per share in FY2020, up 16% YoY.
• DATA achieved significant progress in product and platform with continued investment in Growth Optimisation Plan.

Share Price Performance Analysis

 (Source: REFINITIV, Research done by Kalkine Group)

On 6 July 2021, at 7:34 AM GMT, DATA’s shares were trading at GBX 1,608.00, up by 1.13% against the previous day closing price. Stock 52-week High and Low were GBX 1,750.00 and GBX 1,100.00, respectively.

On a daily chart, DATA's price is sustaining above both 200-day EMA of about GBX 1,448.00 and 200-day SMA of about GBX 1,440.00, indicating the possibility of an upward movement. The MACD line is trading above the centreline and forming a positive crossover with the signal line.

In the last three months, DATA’s stock price has delivered a decent positive return of ~16.06%. It has outperformed the FTSE AIM All-Share Media index with a return of around 15.08% and the FTSE AIM All-Share index with a return of about 3.43%.

Valuation Methodology: Price/Book Value Approach (NTM) (Illustrative)

Business Outlook Scenario

The Company delivered a robust financial performance till 31 May 2021 despite the ongoing Covid-19 disruptions. At the start of FY2021, DATA had a £92.7 million forward revenue position. Furthermore, DATA’s business model is defined by highly recurring subscription revenue, high incremental margins, solid cash flow generation and large diversified opportunities. The Company is driven by a diversified client portfolio, client centricity, agile operations, sales excellence and world-class product and user experience going into FY2021. Moreover, DATA has a low variable cost and consistent fixed cost model that drive its solid margins. The management also has enough confidence in DATA’s prospects that it offered a final dividend per share of GBX 11.60 in FY2020, up 16% YoY.

The board anticipates further growth in FY2021, driven by the Company’s Growth Optimisation Plan. On the technical chart, the next important support level is at GBX 1,390.00.

Based on the decent performance so far in H1 FY2021, solid growth optimisation plan, resilient business model, the better profitability of the Company than the industry, and support from valuation as done using the above method, we have given a “Speculative Buy” recommendation on GlobalData Plc at the current market price of GBX 1,608.00 (as on 6 July 2021 at 7.34 AM GMT), with a lower double-digit upside potential based on 15.12x Price/NTM Book (approx.) on FY21E book value 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 or if the price closes below the support level (indicative stop-loss price).

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

*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

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