Learning Technologies Group PLC

Learning Technologies Group PLC (LON: LTG) is an FTSE AIM UK 50 Index listed Company, which is engaged in the business of digital learning and talent management. The broader set of business segments include Software & Platforms, Content & Services and Other Segment.

LTG had paid a final dividend of 0.50 pence per share on 25 June 2021, while the ex-dividend date was 03 June 2021.

Investment Rationale for Valuation – Sell at GBX 190.50

• The Content & Services revenue plunged by 22% year-on-year in FY20.
• The stock has moved 55.61% upside in the last year and currently trading near the 52-week high of GBX 196.80, indicating a lucrative position to book profits.
• LTG had not raised the final dividend during FY20. Moreover, the stock went ex-dividend on 03 June 2021.
• The current ratio of 1.57x remained slightly lower than the industry median of 1.61x during FY20.
• From a technical standpoint, a 14-day RSI of ~66.76 inches towards the overbought zone and indicates a correction in the stock price.

Key Risks

• The client contractual risk may impact the growth trajectory of the Company.
• The strengthening of sterling against the US dollar would impact the top-line business of LTG.
• The boom in remote learning may reach a saturation point very soon.

AGM Statement (as of 26 May 2021)

• The Company had managed to broaden the addressable market through the acquisitions of Open LMS, eThink and eCreators.
• Moreover, the acquisition of Reflektive and Bridge during Q1 FY21 had consolidated LTG’s footprints into the talent development mid-market.
• On the liquidity front, the Company had adequate net cash of £24.8 million as of 30 April 2021.
  

One Year Share Price Chart

 (Analysis done by Kalkine Group)

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

Conclusion

The Company had anticipated a strong recovery in the Content & Services division during FY21. Moreover, the Company remained optimistic regarding achieving the strategic target of delivering revenue of £230 million and adjusted EBIT of around £66 million during FY22. However, the weakening of the US dollar against the sterling could hamper the growth prospects. Any kind of slowdown in the online learning market may adversely impact the top-line revenue of LTG. The stock made a 52-week low and high of GBX 112.10 and GBX 196.80, respectively. 

Based on the underperformance of the Content & Services division during FY20 and unfavourable valuation as done using the above method, we have given a “SELL” recommendation on Learning Technologies Group PLC at the closing market price of GBX 190.50 (as of 28 June 2021) while we will suggest fresh buying once we identify further growth catalysts for LTG.

D4T4 Solutions PLC

D4T4 Solutions PLC is an FTSE AIM All-Share listed Company that is the provider of data solutions. It was established in 1985 with global sales and delivery in 26 countries.

The Company will pay a final dividend of 2.0 pence per share on 17 September 2021, while the ex-dividend date will be 13 August 2021.

Investment Rationale for Valuation – Sell at GBX 395.00

• The Company had reported a significant drop in profitability as the statutory profit before tax had declined from £4.9 million during FY20 to £3.0 million for FY21.
• The CEO, Peter Kear, had announced the plans to retire by June 2022.
• D4T4 is trading very close to the 52-week high of GBX 410.00, providing a tremendous opportunity for the investors to liquidate their positions and book profit. 
• From a technical standpoint, a 14-day RSI of ~70.36 indicates a correction in the stock price. Moreover, the stock price is hovering around the upper Bollinger band, indicating an overbought zone.

Key Risks

• Increasing incidents of cyber-attacks can put data security at risk.
• The travel restrictions can have an adverse impact on new business and pipeline opportunities.
• Lengthening of the sales cycle could have an impact on cash flows.

Recent Developments

On 15 June 2021, D4T4 had launched the Celebrus Fraud Data Platform to protect customers across all digital touchpoints.

On 25 May 2021, the Company had launched new features of Celebrus CDP version 9.4, delivering unrivalled identity capabilities to the marketplace.

FY21 Financial & Operational Highlights (for the twelve months ended 31 March 2021, as of 29 June 2021)

(Source: Company result)

• D4T4 had shown modest revenue growth of around 4.6% to £22.8 million during FY21.
• The annual recurring revenue represented approximately 47% of the total revenue during FY21.
• The diluted basic earnings per share had dropped to 6.75 pence during FY21.
• D4T4 had reported cash & cash equivalents of £14.24 million as of 31 March 2021.

.

One Year Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings (NTM) (Illustrative)

Conclusion

The Company had kickstarted FY22 on a bright note as it worked upon the contracts won during H2 FY21. Moreover, the launch of the Celebrus Fraud Data Platform would enable D4T4 to access the growing USD 18 billion market. Furthermore, the revenue from the Celebrus product family represented almost 81% of the total revenue in FY21. However, the pre-tax profit had contracted despite growing annual revenues and a surge in gross profit during FY21. The stock made a 52-week low and high of GBX 173.00 and GBX 410.00, respectively. 

Based on the drop in FY21 statutory profit before tax and unfavourable valuation as done using the above method, we have given a “SELL” recommendation on D4T4 Solutions PLC at the closing market price of GBX 395.00 (as on 28 June 2021), while we will revisit our stance once D4T4 starts reporting revenues from the Celebrus Fraud Data Platform. 

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

*All forecasted figures and Peers/ Industry information have been taken from REFINITIV.

*The dividend yield is subject to change as per the stock price movement.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.