Restore PLC (LON: RST)

Restore PLC is an FTSE AIM 100 index listed Company, which provides document management and relocation services to offices and workplaces in the private and public sectors. The primary operation of the Company is in the United Kingdom.

Recent trend of dividend payments

The Company had proposed a final dividend of 4.50 pence per share to be paid on 08 July 2022, with an ex-dividend date of 01 June 2022. It has taken the full-year FY21 dividend to 7.20 pence per share. In comparison, the Company had not paid any dividend for the prior year.

Growth Prospects

• Improved UK Jobs Data: According to the Office for National Statistics, Britain’s unemployment rate had dropped to 3.8% for the three months till February 2022. It will support the Company to produce strong top-line revenue during FY22
• Acquisition Benefits: The Company has completed eight acquisition deals during FY21 and achieved a post synergy ROIC (“Return on Invested Capital”) of 13.0%.

Key Risks 

• FOMC Meeting Minutes: The Federal Open Market Committee's meeting minutes indicated that the Federal Reserve is preparing to move aggressively to head off inflation.
• Record UK Inflation: British inflation hit a 30-year high of around 6.2% in February 2022, which may cause a further interest rate hike.
• Other Significant Risk: The Company’s performance is subject to various other risks, including finance and liquidity risk, cyberattack risk, change in market dynamics, and loss of confidential customer records.

Key Fundamental and Shareholders Statistics of Restore PLC.

Invesco Advisers, Inc is the most significant shareholder as it holds nearly 16.63 million shares.

Financial Highlights (for the year ended on 31 December 2021, as on 16 March 2022)

(Source: Company Filings)

• Strong Top-Line Business: The Company’s top-line revenue grew year-on-year by around 28% to £234.3 million, driven by decent organic growth.
• Profitability: The Statutory profit before tax went up by 475% to £23.0 million during FY21.
• Decent Leverage: RST has a strong Cash conversion at 85%, with closing net debt at £100.8 million and leverage of 1.8x as of 31 December 2021.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 12 April 2022 at 08:03 AM GMT+1, RST’s shares were trading at GBX 453.50, up by around 0.78% from the previous day’s closing price. Stock’s 52-week High and Low were GBX 530.00 and GBX 366.00, respectively.

On a daily chart, the stock price is sustained above the 20-days exponential moving average of GBX 449.67. Hence, there could be an uptick in the stock price in the near term.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

The Company had generated a record top-line revenue and bottom-line profitability during FY21, backed by accelerated strategic progress and significant organic growth. RST aims to derive synergies from accretive acquisitions completed in 2021. In terms of financial guidance, the Company targets to grow annual revenue to £450-500 million and double EBITDA to more than £150 million. Post FY21 end, the Company has also added additional debt facilities to strengthen the future investments. In a nutshell, the Company aims to achieve increased returns for the shareholders with a robust sales momentum and a well-progressed pipeline of acquisitions.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the acquisition benefits, record FY21 results, the better profitability and liquidity ratios than the industry, resumption of dividend payments, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Restore PLC at the current market price of GBX 453.50 (as of 12 April 2022 at 08:03 AM GMT+1), with lower-double digit upside potential based on 20.04x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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