Moonpig Group PLC

Moonpig Group PLC (LON: MOON) is an online gifting and greeting card platform that offers a wide range of products, including flowers, chocolates, beauty products, soft toys, books, among others.

On 28 September 2021, Moonpig has scheduled its annual general meeting. It will also release a trading update along.

Rationale for Valuation – HOLD at GBX 377.20

• Moonpig has entered into a partnership with Virgin Wines to launch a range of products exclusively on the Moonpig platform.
• The Company demonstrated solid maiden results and shown remarkable progress against the strategy outlined at initial public offer (IPO).
• Revenue and adjusted EBITDA grew more than double in FY21 on FY20, reflecting higher purchase frequency and strong new customer acquisition.
• In FY22, Moonpig expects to report revenue in the range of £250 million to £260 million, representing 45% to 50% growth compared to FY20.
• From a technical standpoint, the stock price is nearly at the lower standard deviation of the Bollinger Bands, while the RSI (~46.97) confirms the oversold position.
• Since FY18, Moonpig has maintained strong profitability margins as gross margin, operating margin and net margin have remained above 50.5%, 10.5% and 5.6%, respectively. All three margins were better than the industry median.

Key Risks

• The UK retailers have extended the losing streak as retail sales fell 0.9% in August 2021, albeit remained above the pre-pandemic level.
• As 40% of the UK Companies are facing recruitment difficulties, it can create operational challenges in the short-term.
• The UK inflation rate has jumped to 9-year higher in August 2021, which can keep the consumer sentiments subdued.
• The supply chain concerns have impacted the UK Manufacturing Purchasing Managers' Index in August 2021. It can derail the economic recovery and dampen the investors’ sentiments.

Recent News

Secondary Placing: On 5 August 2021, Moonpig announced the completion of a Secondary Placing of around 19.4 million, with a small group of institutional investors.

Financial Highlights (for the year ended 30 April 2021, as on 27 July 2021)

 (Source: Company Website)

• During FY21, revenue grew around 113% year-on-year, while the adjusted EBITDA increased around 107% year-on-year.
• With an adjusted operating cash conversion of 106%, the Group remained highly cash generative.
• As of 30 April 2021, Moonpig expanded the database to over 50 million reminders set and more than 190 million cumulative transactions.
• The Company delivered 50.9 million orders during the year and has shown significant progress in enhancing its customer proposition.

Share Price Chart (since 02 February 2021)

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

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

Conclusion 

As the Company continued to deliver against its strategic priorities outlined in IPO, the Group is well-positioned for sustained underlying growth. Despite the slower lifting of lockdown restrictions, Moonpig started FY22 moderately ahead of expectations. Moreover, the Company expects to uplift the scale of business with a consistent level of customer retention. In the medium-term, the Group targeting revenue growth in the mid-teens with an Adjusted EBITDA margin of around 24% to 25%. The stock made a 52 week High and Low of GBX 499.95 and GBX 351.00, respectively. 

Based on robust revenue growth, strong cash generation, significant progress on strategic priorities since IPO, and adjusted EBITDA guidance, supported by the valuation conducted above, we have given a “HOLD” recommendation on Moonpig Group PLC at the current market price of GBX 377.20 (as on 20 September 2021 at 08:26 AM GMT+1), while we look forward to taking fresh positions when we have clarity that how Moonpig will adapt when lifting lockdown restrictions lead to normalization in customer purchase frequency from elevated levels.

Dev Clever Holdings PLC

Dev Clever Holdings PLC (LON: DEV) is a software and technology provider in the United Kingdom. It specialises in gamification technologies and lightweight integrations of cloud-based virtual reality software.

Investment Rationale – HOLD at GBX 34.03

• On 27 July 2021, DEV completed the acquisition of the Inspirational Learning Group Limited (TILG) for a cash consideration of £129,200 and the issue of 6,994,177 new ordinary shares in Dev Clever. It will strengthen the Company’s capability to expand its services to a global user base.
• With significant contract wins in the Educate division, DEV reported 531% year-on-year growth in revenue in H1 FY21.
• It has robust forward momentum across the business to deliver incremental progress with both local and national government contracts.
• From a technical standpoint, the MACD line remained above the signal line, indicating an upside potential in the stock price.

Risk Assessments

• It is a loss-making entity that is exposed to liquidity risk due to operational challenges imposed by the Covid-19 pandemic,
• The short-term demand is likely to remain suppressed, while it can faece significant regulatory pressure before entering the other international markets.

Recent News

Partnership: On 2 September 2021, Dev Clever signed a definitive document regarding the partnership with Aldebaron DMCC. As per the contract, Aldebaron will generate minimum guaranteed revenues of US$50 million for Dev Clever over the next 4 years.

Interim Results (for the period ended 30 April 2021, as on 05 July 2021)

 (Source: Company Website)

• During H1 FY21, DEV accelerated progress in the global EdTech space, and shown 531% year-on-year growth in revenue.
• Despite the revenue growth in H1 FY21, the Company reported an EBITDA loss and adjusted loss after tax of £162,000 (H1 FY20: loss of £561,000) and £92,000 (H1 FY20: loss of £551,000), respectively.
• However, through the net proceeds of fundraising, the cash position looked robust at £9.7 million (H1 FY20: £472,000) at the end of H1 FY21.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

Conclusion

During the H1 FY21, DEV also proposed the acquisition of Veative's Indian subsidiary and development centre and signed a 5-year exclusive agreement with the National Independent Schools Alliance, which shall provide strong momentum. It has also increased the financial resources substantially and eyeing accelerated investments in M&A, infrastructure, and proprietary content. The new partnership with TILG and Aldebaron should also bolster the Company’s proposition to enter new markets and swiftly expand the user base. The stock made a 52-week High and Low of GBX 47.90 and GBX 6.00, respectively.

Based on the revenue growth, enhanced cash position, recent contracts and partnerships in EdTech space, we have given a “HOLD” stance on Dev Clever Holdings PLC at the current market price of GBX 34.03 (as on 20 September 2021 at 08:23 AM GMT+1), while we look forward to taking fresh positions once we have financial guidance regarding profitability.

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

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

*Dividend Yield may vary 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.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.