YouGov PLC (LON: YOU)

YouGov PLC is an FTSE AIM 100 Index listed international data and analytics company. The Group has one of the world's largest research networks, with 37 offices across the globe. The Company provides a data-led offering that supports and improves a broad spectrum of marketing activities of a customer base, including media owners, brands, and media agencies.

On 12 October 2021, YOU will release the FY21 results.

Recent trend of dividend payments

 (Data Source: LSE Website, Research done by Kalkine Group)

The chart above demonstrates the growth in dividend payment done by YOU from FY16 to FY20. The Company follows a progressive dividend policy and paid a dividend amounting to £5.42 million in FY20 against £4.30 million in FY19, showing 25% growth in the dividend.

The Company is likely to declare a dividend for FY21 in its results for 12 months ending 31 July 2021, scheduled to be released on 12 October 2021.

Growth Prospects (covering pre-close trading update released on 30 July 2021)

• Investments Driving Growth: The Company continues to invest aggressively, backed by a solid balance sheet. YOU commenced expanding YouGov’s panel into 15 new markets. It also expanded YouGov Direct into new markets and integrated with YouGov Chat to acquire members. In addition, the Company recently acquired Faster Horses, an Australian online-focussed data insights consultancy company, to cement YouGov's position in Australia and enable it to capitalise on panel investments in the region.
• Solid Guidance: As per the growth guidance for FY19-FY23, the Company plans to double its Revenue and Adjusted Operating profit margin while growing EPS at a CAGR of more than 30% during the period.
• Revival of Data Service Segment: The Company saw a robust growth across all regions as pent-up demand for fast-turnaround tactical project work was released. In H1FY21, the Europe division reported double-digit growth while the US division grew by 33% on a reported basis. The Company expects sales growth to continue in H2FY21.
• Low Leverage: YOU has very low leverage in its balance sheet, with a debt/equity ratio of 0.00x in H1 FY21. Hence, it can easily raise cheap debt to fund its capital investments, if required.

Key Risks 

• Competition: Failure to compete with the peers due to loss of market share or keeping up with developments in technology such as blockchain and artificial intelligence could impact the revenues and growth outlook of the Company.
• Legal Risk: Non-compliance with data protection or privacy legislation, such as EU GDPR, could lead to significant penalties.
• Cyber Threat: Inadequacy of IT infrastructure or system failure increases the chance of cyber-attacks. Any such occurrence from an external or internal source could adversely affect the operations and reputation of the Company.
  

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

Financial and Operational Highlights (for the six months ended 31 January 2021 as of 23 March 2021)

(Source: LSE Website)

• The Company reported revenue growth of 3% with underlying growth of 9% to £79.0 million, with optimism for the H2FY21 growth. 
• The Data Products revenue increased by 6% to £26.5 million.
• The Data Services revenue increased by 19% to £21.8 million, driven by a recovery in demand for more tactical, fast turnaround projects.
• Underlying operating profit (excluding impact Kurdistan closure and forex movement) was up by 15%.
• On the operational front, the acquisition of Canadian sports research firm Charlton Insights, expanding the Group's sports presence in North America. The Company also successfully won a significant new contract from a major multinational media agency and a US-based game developer.

Financial Ratios (H1FY21)

 Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 28 September 2021, at 12:40 PM GMT+1, YOU’s shares were trading at GBX 1,271.00, down by around 4.07% against the previous day closing price. Stock 52-week High and Low were GBX 1,495.00 and GBX 810.00, respectively.

On a daily chart, YOU's price is sustaining between the middle and lower Bollinger bands. Hence, there could be an uptick in the stock price in the near term. The 14-days RSI stood at ~45.21 levels.

In the last one year, YOU’s stock has delivered a positive return of ~58.54%. Also, it has outperformed the FTSE All-Share Media index with a return of about 46.59% and the FTSE AIM 100 index with a return of about 28.59%. 

Valuation Methodology: EV/EBITDA Approach (NTM) (Illustrative)

Business Outlook Scenario

The Company delivered decent numbers in H1FY21 with a strong sales pipeline boosting confidence for FY21 and FY22. The Company expected growth across all segments and geographies based on the revival of economic activities and solid demand for more tactical, fast turnaround projects. The Group continues to invest in broadening its sales resource to drive growth and capture long term recurring revenue contracts. The recent acquisitions indicate that the Company is not looking to expand in single geography but around the globe, including Australia and the US market. YOU have a solid balance sheet with zero debt, and an increase in cash balance provides a solid platform to grab opportunities for expansion and gain market share.

Considering the Company’s investments, the improved outlook of segments, the better profitability, liquidity & leverage position of the business than the industry, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on YouGov Plc at the current price of GBX 1,271.00 (as on 28 September 2021 at 12:40 PM GMT+1), with lower-double digit upside potential based on 30.08x EV/NTM EBITDA (approx.) on FY22E EBITDA (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Disclaimer

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