The Mission Group PLC (LON: TMG)

The Mission Group PLC (LON: TMG) is an FTSE AIM All-Share index-listed Company that provides marketing and advertising related services in the United Kingdom, rest of Europe, Asia, and the United States.

Recent Trend of Dividend Payments

TMG has resumed paying dividends in FY21 and will pay a final dividend of 1.60 pence per share on 29 July 2022 with an ex-dividend date of 14 July 2022. The total dividend for FY21 remained 2.40 pence per share, an increase of around 4% from FY19 levels.

Growth Prospects

• Acquisition Benefits: The recent acquisition of Livity will strengthen Generation Z marketing offering across the Group.
• Strong Client Relationship: TMG had shown strong Client retention across Agencies. Moreover, it has achieved encouraging blue-chip global Client wins such as Reckitt Benckiser, BMW/Mini, Fuji Xerox and the Met Office.

Key Risks 

• Increase in Net Debt: TMG has shown an increase of £9.1 million in its net debt during FY21.
• Record UK Inflation: The rise in regulated household energy bills led to UK inflation leaping to 9% in April 2022, the highest level since 1982. It may adversely impact UK equities.
• Impressive US Jobs Data: The S. jobs report released recently had signalled more interest rate increases in 2022 that could adversely impact the global equities.
• Bank of England Warning: The Bank of England had trimmed its economic growth forecast for 2023 and is expected to show a contraction of 0.25% from a previously estimated growth of 1.25%. Moreover, it had also warned of UK inflation reaching around 10% very soon.

Key Fundamental and Shareholders Statistics of The Mission Group PLC.

Octopus Investments Limited is the most significant shareholder as it holds nearly 9.23 million shares.

Financial Highlights (for the year ended 31 December 2021, as of 29 March 2022)

(Source: Company Website)

• Revenue Growth: The Group reported around 18% increase in revenue to £72.50 million in FY21, compared to £61.50 million in FY20.
• Balance Sheet: The closing net bank debt position remained at £10.3 million at the end of FY21. In comparison, it was £1.2 million as of 31 December 2020.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 09 June 2022 at 12:16 PM GMT+1, TMG’s shares were trading at GBX 67.00, down by around 2.19% against the previous day closing price. Stock 52-week High and Low were GBX 88.50 and GBX 43.05, respectively.

On a daily chart, the MACD line has given a bullish crossover against the signal line, indicating an upside potential in the stock price. Also, the stock price is trading above its 20-days exponential moving average of GBX 63.06.

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

Business Outlook

The Company has produced an excellent year on year growth across all segments during FY21 which demonstrated the resilience of Agencies in the portfolio. TMG would continue to focus on exploring acquisition opportunities that further enhance the compelling infrastructure. Meanwhile, the settlement of major Acquisition Obligations and HMRC Covid-19 payment deferrals in FY21 enabled TMG to return to efficient cash generation from future trading. Overall, the Company remained optimistic for FY22 regarding a sustained improvement in revenues and profitability.

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 resumption of dividend payments, turnaround in profitability, acquisition benefits, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on The Mission Group PLC at the current market price of GBX 67.00 (as of 09 June 2022 at 12:16 PM GMT+1), with lower-double digit upside potential based on 11.19x 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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