Euromoney Institutional Investor PLC

Euromoney Institutional Investor PLC (LON: ERM) provides information services globally related to price discovery, events, and market intelligence. It is listed on the FTSE 250 share index of the London Stock Exchange.

Investment Rationale – SELL at GBX 1,036.00

• During nine months to 30 June 2021, reported revenue for Pricing, Data & Market Intelligence, and Asset management divisions were down by 3%, 10%, and 12%, respectively.
• The ongoing travel restrictions can impact physical events in the short term since the rising case of the Delta variant of coronavirus sending alarming signals of gloomy economic outlook.
• From a technical indicator, MACD line is hovering below the centerline, while it is forming a negative crossover with the signal line, reflecting a bearish price momentum.   
• In the last six months, ERM’s stock price has yielded merely ~5.49% of return, showing significant underperformance against the FTSE 250 Index.

Risk Assessments

• The inflationary market conditions, weakening of pound sterling, and cautious outlook on physical events can keep the trading environment under pressure.
• The decline in events and ongoing covid-related travel restrictions can impact the FY21 revenues.

Trading Statement for the nine months ended 30 June 2021 (as on 21 July 2021)

 (Source: Company Website)

• The acceleration in subscriptions revenue growth encouraged the trading performance since H1 FY21.
• During Q3 FY21, revenue surged 14% year-on-year, while there was 7% and 108% growth in subscriptions and events, respectively.
• As of 30 June 2021, the financial position remained strong with £30.4 million in net cash.

Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

Conclusion

ERM’s stock price has given over 30% return in the past year and now trading close to its 52-week high with a negative technical stance. The short-term trading environment is uncertain with the rising Delta variant of coronavirus cases, and thus, the Company failed to provide any financial guidance for FY21. Therefore, it is prudent to liquidate the position in profits, and reinvest capital plus gains when short-term uncertainty fades away and due corrections are being done. The stock made a 52 week High and Low of GBX 1,118.00 and GBX 764.00, respectively.

Considering the resurgence in Covid-19 cases, macroeconomic challenges, and unfavorable valuation conducted above, we have given a “SELL” recommendation on Euromoney Institutional Investor PLC at the current market price of GBX 1,036.00 (as on 23 July 2021, at 7:59 AM GMT).

Manolete Partners PLC

Manolete Partners PLC (LON: MANO) is a FTSE AIM Index listed Insolvency Litigation Financing Company, which works with insolvency practitioners and their lawyers to maximise returns to creditors.

On 21 September 2021, Manolete Partners has scheduled its annual general meeting.

Rationale for Valuation – SELL at GBX 244.00

• Despite being on Rank 1 on the Litigation Funding Insolvency Rankings by Chambers guide, MANO’s stock has fallen over 40% in the past year, showing significant underperformance against the benchmark, FTSE AIM All-Share index.
• During FY21 (versus FY20), profit before tax and earnings per share fell 25% and 26%, respectively.
• The ongoing UK government economic measures have significantly impacted the new case investments. The resurgence in Covid-19 cases and reintroduced restrictions can impact the Company’s operating results further.
• From a technical standpoint, the momentum oscillator 14-day RSI (63.07) is also indicating an overbought stance, price consolidation is expected in the short-term.

Key Risks

• The performance can be impacted with delay in judgement and increase in average case duration due to closure of Courts and inability to work from the office amid Covid-19 crisis.
• Moreover, limited liquidity can restrict the potential to fund new cases. It can also fail to attract enough cases to manage its overheads. Furthermore, unexpected Court decisions can lead to adverse legal costs, and can impact on recoveries as projected.

Recent News

Appointment of Chairman Designate: On 23 June 2021, Howard Leigh was appointed as Senior Independent Director and Chairman Designate of Manolete’s Board.

Financial Highlights for the year ended 31 March 2021 (as on 25 June 2021)

(Source: Company Website)

• Following the 198 new case investments in FY21, revenue increased by 49% year-on-year. However, there was a 25% decline in EBIT in FY19 versus FY20.
• Subsequently, total dividend for the year declined to 1 penny in FY21 from 3 pence in FY20.
• As cash generation remained robust, the Company did not apply for any Covid-19 support from the Government.
• As of 31 March 2021, MANO had 245 live case investments, compared to 175 live cases as of 31 March 2020.

One Year Share Price Chart

   (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative) 

Conclusion

Following the decline in profitability in FY21, the Company has appointed a new Chairman. Also, its dividend was significantly reduced, while finance cost was increased in FY21 against FY20. Moreover, the widespread global economic disruption with a resurgence in Covid-19 cases can continued to increase administrative costs and affect profitability. Therefore, it is rational to liquidate the position at the current levels. The stock made a 52-week High and Low of GBX 435.00 and GBX 175.00, respectively.

Based on the reduced profits, uncertain outlook, rising Delta variant concerns, unfavourable technical stance, supported by the unsatisfactory valuation conducted above, we have given a “SELL” stance on Manolete Partners PLC at the current price of GBX 244.00 (as on 23 July 2021, at 7:25 AM GMT), while we look forward to reinvesting when short-term uncertainty fades away.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

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

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