Plus500 Ltd

Plus500 Ltd (LON: PLUS) is a FTSE 250 listed multi-asset fintech entity operating through technology-based trading platforms.

Investment Rationale – HOLD at GBX 1,423.00

• Promising Outlook: Following the excellent performance in FY21 so far, FY 2021 revenue and EBITDA are likely to surpass the current compiled analysts' consensus forecasts.
• High Customer Confidence: The year-to-date client deposits remained around US$1.6 billion, reflecting strong customer confidence in the Group’s products and platforms
• Economic Recovery: The UK inflation growth has slowed down in September 2021, while the economy has bounced back in Q2 2021, reflecting a sign of recovery as the global economy reopens.
• Technical Indicator: From a technical standpoint, the current market price is trading above the 20-day EMA (GBX 1,408.70), reflecting a bullish price momentum.
• Undervalued Multiples: On a forward 12-month basis - EV/Sales, EV/EBITDA, and Price/Earnings are undervalued against the median of Investment Banking & Investment Services sector.

Risk Assessments

• Market Risk: The Company is also exposed to market risk with high volatility in equity market, and loss of clients with subdued investors’ sentiments.
• Macroeconomic Risk: The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial markets. Moreover, the strengthening of the US Dollar with an increase in US Treasury Yields can hinder the PLUS’ growth prospects.

Q3 FY21 Trading Update (for the three months ended 30 September 2021, as on 25 October 2021)

 (Source: Company Website)

• Positive Momentum: PLUS remained well-positioned to access significant opportunities as the key metrics remained ahead of pre-pandemic levels.
• Health Balance Sheet: The Group maintained a robust financial position with cash balances of US$766.9 million, at end of Q3 FY21.

Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

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

Conclusion 

PLUS demonstrated excellent performance in Q3 FY21, reflecting solid operational performance. It aims future growth through targeted bolt-on acquisitions and continued organic investment. It also plans to deepen customer engagement and launch new products to pursue additional growth opportunities over the medium to long term. The stock made a 52-week High and Low of GBX 1,658.50 and GBX 1,234.00, respectively.

Based on the strong customer confidence, significant technology investments, robust cash balance, and favourable valuation conducted above, we have given a “HOLD” stance on Plus500 Ltd at the current market price of GBX 1,423.00 (as on 26 October 2021, at 8:15 AM GMT+1), while we look forward to taking fresh position when short-term macroeconomic uncertainties subside.  

Creo Medical Group PLC

Creo Medical Group PLC (LON: CREO) is a FTSE AIM 100 index listed medical device entity focusing on the emerging field of surgical endoscopy.

Investment Highlights – HOLD at GBX 165.00

• Regulatory Progress: CREO showed continued regulatory progress for its products as MicroBlate Flex got FDA 510(k) clearance, and the Company reported 326 granted patents and 810 pending applications as of 31 August 2021.
• Strengthened Balance Sheet: Following the successful placing of additional £36.3 million, CREO has solid balance sheet to pursue strategic growth opportunities.
• Technical Indicator: From a technical standpoint, 14-day RSI (~34.39) is close to an oversold position, while the stock price is hovering around the lower Bollinger Band.
• Outperformance Against Index: CREO has surged around 106.51% in the past five years, showing significant outperformance against the benchmark index, FTSE AIM UK 100 index.

Key Risks

• History of Operating Losses: The Company is not yet profitable and can face liquidity crunch in absence of substantial capital.
• Pandemic Led Disruption: The restrictions on elective surgery had raised the likelihood of the commercial execution risk. The increased financial pressure on governments and hospitals caused by the Covid-19 pandemic has exposed CREO to pricing and reimbursement risk.

H1 FY21 Financial Highlights (for the six-month period ended 30 June 2021, as on 30 September 2021)

 (Source: Company Website)

• Strong Orders: The Group experienced solid orders for for Speedboat Inject across the US and Europe.
• Operational Progress: During H1 FY21, it reported total sales of £12.9 million (H1 FY20: £0.0 million).
• Operating Loss: Its operation loss slightly worsened to £11.4 million in H1 FY21 from £10.6 million in H1 FY20, reflecting the impact of £0.6 million in share-based payments.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

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

Conclusion

During H1 FY21, CREO reported strategic and operational progress despite the continuing challenges posed by the pandemic. It expects strong trends in H2 FY21 with increasing clinician education and training sites. Besides strong growth in the US and Europe, it has also enhanced direct presence in the APAC region. In a nutshell, the Group appeared optimistic for continued progress in FY22. The stock made a 52-week high and low of GBX 236.00 and GBX 138.00, respectively.

Based on the strong revenue growth, positive trends, growth in clinical network, strengthened commercial infrastructure, and valuation conducted above, we have given a “HOLD” recommendation on Creo Medical Group PLC at the current price of GBX 165.00 (as on 26 October 2021, at 8:03 AM GMT+1), while we look forward to taking fresh positions once we have clear financial guidance.  

*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.

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