RM PLC (LON: RM.)

RM PLC (LON: RM.) is an FTSE All-Share index listed Company that supplies technology and resources to the education sector. Moreover, it provides products and services to educational institutions, exam bodies and international governments. The Company is focused on the maintenance and development of a diverse set of innovative solutions and services, all of which are tailored to the demands of educational users.

Recent Trend of Dividend Payments

RM will pay a final dividend of 3.00 pence per share on 29 April 2022, while the ex-dividend date was 17 March 2022. It has taken a full-year FY21 dividend to 4.70 pence per share. In comparison, RM. had paid a total dividend of 3.00 pence per share for FY20. Thus, the total dividend growth remained around 57.67%.

Growth Prospects

• Education Landscape: RM is ideally positioned to capitalise on the changing educational landscape through its three divisions, RM Resources, which is a known producer of educational resources; RM Results for major assessment software; and RM Education which is provider of information and communication technology (ICT) software, technology, and services to UK schools and institutions.
• Technological Advancements: The Company had shown its accelerated progress regarding the New digital and automated platforms. It aims to integrate the end-to-end platform, and the automated warehouse would enable improved customer service and data insight.

Key Risks 

• Interest Rate Hike: The Federal Reserve announced a first interest rate hike (by 0.25%) in over three years and indicated seven rate hikes in 2022.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• High Leverage: The Company’s debt to equity ratio of 0.47x remained significantly higher than the industry median of 0.17x during H1 FY21, implying a weak leverage position when compared with the industry.

Key Fundamental and Shareholders Statistics of RM PLC.

Schroder Investment Management Ltd. (SIM) is the most significant shareholder as it holds nearly 14.26 million shares as of 31 December 2021.    

FY21 Financial & Operational Highlights (for the year ended 30 November 2021, as of 15 February 2022)

(Source: Company Website)

• Top-line Growth: During FY21, revenue jumped 12%, supported by strong trading in RM Resources.
• Balance Sheet: The net debt increased to £18.3 million as there was a movement of the pension position from a deficit to a surplus. 

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 18 March 2022 at 08:44 AM GMT, RM.’s shares were trading at GBX 143.10, down by around 2.65% against the previous day closing price. Stock 52-week High and Low were GBX 260.00 and GBX 142.00, respectively.

On a daily chart, the stock price is sustained around the lower Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI of ~29.94 approaches oversold territory.

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

 Business Outlook.

The Company has shown a resilient business performance during FY21 with improved top-line business and a solid growth in full year dividend payments. Moreover, the outlook seems promising on the back of improved education fundamentals, expected benefits from digital programmes, improved net debt position, and solid trading momentum. Overall, the Company has solid plans to unlock growth with the new IT platform and automated warehouse expected to be fully operational by the end of 2022.

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 significant operational progress, decent FY21 business performance, solid dividend payments, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on RM PLC at the current price of GBX 143.10 (as of 18 March 2022 at 08:44 AM GMT), with lower-double digit upside potential based on 8.27x 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.

Disclaimer

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