Ideagen Plc

Ideagen Plc (LON: IDEA) is a software & computer services Company, engaged in the sale and development of information management software to customers from multiple industries with related professional support and services.

On 22 July 2021, the Company will release its preliminary full-year results.

Rationale for Valuation – Hold at GBX 278.00

• The Company expects strong performance in FY21, supported by organic growth and enhanced banking facilities.
• During the period, the performance was in line with expectations, while it has a strong balance sheet with excellent cash generation.
• Further, it made three significant acquisitions, with customer expansion and new customer logo wins across verticals.
• In H1 FY21, IDEA has decent fundamental metrics as it has maintained gross and EBITDA margins above the industry median.
• In the last one year, the Company has delivered a sparkling return of ~75.16%, which was higher than the FTSE AIM 100 Index.
• From a technical standpoint, 200-day SMA (GBX 245.70) supports an upside potential.

Key Risks

• There is a credit risk associated with the financial loss of customers and liquidity risk arising from fluctuating interest and exchange rates.
• The Covid-19 pandemic has also disrupted the customer demand pattern.
• Furthermore, patent filings and demand for language support can be delayed or impacted by Brexit and Covid-19 uncertainties.

Pre-Close Trading Update (for the year ended 30 April 2021, as on 13 May 2021)

• Despite the challenges brought by the pandemic, the Company reported a year of continuing growth, with a robust financial position and adding three significant acquisitions.
• In FY21, ARR (Annual recurring revenue) is expected to be £54.2 million, an increase from the previous year (30 April 2020: £43.1 million).
• It expects total revenue to be increased by around 16% YoY and adjusted EBITDA to be increased by approximately 24%.
• During the period, IDEA won 557 new customers.
• On 30 April 2021, the gross cash balance was £9 million and gross bank borrowings of around £20 million.

One Year Share Price Chart

   (Source: Refinitiv, Thomson Reuters)

Conclusion

The Company stated that it reports another strong year for Ideagen, supported by growth in organic and recurring revenue, and excellent cash generation. It is expanding the customer base by adding new customers. Recently, it appointed a new Chairman, Richard Longdon. In FY21, the Company expects an increase in total revenue and adjusted EBITDA.  Further, in FY21, the cash generated by operations is expected to be more than 105% of adjusted EBITDA. The Company witnessed a robust balance sheet, with net bank debt at the period end of £11 million. It also extended its total available debt facilities. Overall, the Board stays confident in the IDEA's prospects for the future based on the sector's structural drivers and the continued execution of the Group's strategy. The stock made a 52-week low and high of GBX 154.00 and GBX 314.00, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for Ideagen at the current price of GBX 278.00 (as on 18 May 2021, at 8:00 AM GMT) and will recommend fresh buying at the right time.

Loungers Plc

Loungers Plc (LON: LGRS) is in the business of having café/bar/restaurants across Wales and England.

Rationale for Valuation – Hold at GBX 290.00

• In the last one year, the Company has delivered a sparkling return of ~235.26%, which was higher than the FTSE AIM All-Share Index.
• It witnessed a robust balance sheet and strong liquidity, with a reduction in non-property net debt.
• From a technical standpoint, 200-day SMA (GBX 205.3) supports an upside potential.

Key Risks

• The prolonged travel restrictions and battered passenger demand can widen the losses and put liquidity at significant risk.
• Moreover, the failure in cybersecurity and a critical data breach could hamper the operations as well as the reputation of the Company.
• Fluctuations in exchange rates and increased volatility in fuel prices could impact the profitability and balance sheet position.

Recent News

On 9 April 2021, the Company had approved a twelve-month extension to the incremental £15.0 million revolving credit facility (RCF). Therefore, the total RCF facilities were £25 million.

Financial Highlights (for the 24 weeks ended 4 October 2020 (H1 FY21), as on 2 December 2020)

(Source: Company Website)

• The revenue decreased by 33.0% YoY, due to the impact of national lockdown.
• Between 4 July and 4 October, the like-for-like (LFL) sales increased by 25.1%.
• The Company witnessed a strong balance sheet, with an increase in cash and cash equivalents and reduction in non-property net debt.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

Conclusion

Once Covid-19 restrictions are eased, the Company expects a strong trading environment for the brands. It also expects to return to a run rate of 25 new site openings per annum till FY22. The Company participated in the Government’s ‘Eat out to help out’ campaign. The Company expects the cash position to remain equally as strong. It will provide a good platform for investment in future growth and opportunities, supported by strong cash generation. Overall, the Company seems to be well-positioned to maximise the opportunities ahead. The stock made a 52-week low and high of GBX 83.45 and GBX 300.00, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance on Loungers at the current price of GBX 290.00 (as on 18 May 2021 at 8:00 AM GMT) and will recommend fresh buying at the right time.

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

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