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%
IG Design Group Plc (LON: IGR): Strong FY21 outlook and efficient cost management.
IG Design Group is an FTSE AIM 100 listed Company, engaged in designing, manufacturing and innovation of products related to Craft, Gift Packaging, Celebrations and Stationery. The Company was incorporated in 1979, with Scandinavian Design came into existence to manufacture and supply gift wrap to retail and wholesale customers.
The Group had rebranded its business as International Greetings in 1989 to reflect the international expansion. In April 2021, the Company will release the post-close trading update.
(Source: Company website)
Growth Prospects and Risk Assessment
IGR would continue to develop sustainable product lines focusing on innovation in its design. The acquisition of CSS had performed well and delivered several synergies resulted in an increase in the Group’s adjusted profit before tax during the first nine months of FY21.
(Source: Company presentation)
The Company had managed to operate all its regional businesses and manufacturing units despite Covid-19 restrictions, with its primary focus on optimizing trading opportunities. Moreover, the Brexit end had not created any operational headwind so far.
However, the performance can be significantly impacted by principal risk of increasing frequency of cyber hacks, sustainability, Health & Safety concerns, supply chain integrity, liquidity and treasury management, customer default and acquisition risk. The Group is also exposed to Covid-19 related risk and economic uncertainty regarding changes in the global economy.
Industry Outlook Dynamics
Based on the recent report by Allied Market Research, the market size of the global gift cards industry was USD 619.25 billion in 2019. It is projected to grow at a CAGR of 16.2% for the period from 2020 to 2027 and reach USD 2,076.51 billion by 2027. The demand for gift cards had surged since the emergence of Covid-19 pandemic due to reduced usage of cash payments in the market. The rapid growth in digital transformation and increasing technological innovation are boosting the industry.
After understanding the industry dynamics, we will analyse some key fundamental and shareholders statistics of IG Design Group Plc.
Recent Developments
On 4 January 2021: The Company has appointed Greg Hodder as an Independent Non-Executive Director, with an immediate effect.
A Glimpse of Business Segments
(Source: Company Website)
Trading Update (for the nine-month period ended 31 December 2020, as on 25 January 2021)
Financial and Operational Highlights (for the six months ended 30 September 2020 (H1 FY21), as on 24 November 2020)
(Source: Company Website)
Financial Ratios
Share Price Performance Analysis
On 16 February 2021, at the time of writing (before the market close, at 9:50 AM GMT), IG Design Group Plc shares were trading at GBX 490.00, down by 0.61% against the previous day closing price. Stock 52-week High was GBX 766.00, and Low was GBX 300.00, respectively.
From a technical standpoint, 14-day RSI (27.30) supports the upside potential.
In the last five years, IG Design Group Plc’s stock price has delivered ~227.27% return as compared to ~96.52% return of FTSE AIM 100 Index and a ~9.79% return of FTSE All-Share Household Goods index, which shows that the stock has outperformed the benchmark sector and the benchmark index.
Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)
Business Outlook Scenario
IGR had delivered resilient business performance during the first nine months of FY21. Furthermore, the sales in the Christmas festive season had performed on the expected lines, particularly the sales across the best sellers such as gift wrap, Christmas Décor, and creative play. The Company had demonstrated seasonal debt levels substantially lower than its FY20 levels and anticipated average leverage to remain below 0.5x for FY21. IGR had paid an interim dividend of 3 pence per share on 15 January 2021, illustrating long term confidence in its strong future pipeline. Meanwhile, the acquisition of CSS had made significant contributions, and it had increased the US dollar revenues to more than 70% of the total revenue. Overall, IGR is well-positioned to deliver consistent growth for financial year FY22 and beyond.
Considering the strong order book, increase in reported revenue in 9M FY21, reduction in net debt, stronger performance from the enlarged e-commerce based activities, sustainable business model, strong retail customers growth across all territories, encouraging sales levels, sturdy signs of progress, robust demand, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on IG Design Group Plc at the current price of GBX 490.00 (as on 16 February 2021, before the market close at 9:50 AM GMT), with lower-double digit upside potential based on 24.74x Price/NTM Earnings (approx.) on FY21E 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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