Unilever PLC

Unilever PLC is a FTSE 100 FMCG (fast-moving consumer goods) Company. It markets and produces a broad portfolio of home care, food, beverages, health, and wellbeing products.

Investment Rationale – HOLD at GBX 3,863.50

• Growth Prospects: Unilever’s operational excellence underpins its ability to drive competitive growth. It expects margins to be flat in FY21 against FY20, despite elevated inflationary levels.
• Strong Digital Capability: Unilever’s eCommerce sales increased by 38% year-on-year in Q3 FY21, and now it represents 12% of total sales.
• Dividend: The Group recommended a quarterly dividend of €0.4268 per share, reflecting continued operational excellence.
• Better Profitability: Over the past two years (H1 FY19 to H1 FY21), ULVR’s return on equity has remained above 14.9%, which is higher than the industry median.
• Technical Indicator: From a technical standpoint, the momentum oscillator, 14-day RSI (~42.99) indicates an oversold signal, while the stock price is trading around the lower Bollinger Band.

Risk Assessments

• Interest Rate Hike: UK inflation slowed unexpectedly in September 2021, and thus, it is unlikely to deter the Bank of England from an interest rate hike.
• Market and Operational Risk: Consumer tastes and preferences are changing rapidly than ever before. Also, the volatility in the prices of commodities and raw materials can affect the operational margins.

Recent News

Share Buy-Back Programme: On 20 August 2021, ULVR commenced the second tranche of its share buyback programme with an aggregate market value equivalent of up to €3 billion.

Q3 FY21 Trading Update (as on 21 October 2021)

 (Source: Company Website)

• Sales Growth: During Q3 FY21, sales grew 2.5% year-on-year with 4.1% increase in price and 1.5% decline in volume.
• Share Repurchase: The ongoing share buyback programme of €3 billion is expected to be completed by the end of FY21.
• Dividend: ULVR recommended a quarterly dividend of €0.4268 per share.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

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

Conclusion

Unilever demonstrated resilience in FY21 so far amid heightened volatility and uncertainty. Moreover, the unification of the Group’s legal structure will strengthen the strategic future. Also, it is progressing well with a share buyback programme of up to €3 billion and completed the operational separation of its Tea business. The stock made a 52-week High and Low of GBX 4,863.00 and GBX 3,721.00, respectively.

Based on the increased revenue, strong capital position, good progress in its growth vectors, business simplification, and favourable valuation conducted above, we have given a “HOLD” stance on Unilever PLC at the closing market price of GBX 3,863.50 (as on 21 October 2021), while we look forward to taking fresh positions once food cost inflation and supply chain woes fade away.

Globalworth Real Estate Investments Limited

Globalworth Real Estate Investments Limited (LON: GWI) is a FTSE AIM listed real estate entity active in Central and Eastern Europe.

Investment Rationale – HOLD at EUR 6.02

• Strengthened Portfolio and Stable Outlook: During the H1 FY21, the Company also acquired two light-industrial facilities in the western part of Romania for €17.9 million. Also, GWI’s portfolio is growing with new additions since its inception, while the Company has maintained a stable outlook from major credit ratings agencies.
• Bright Prospects: The Group appeared confidence about the medium and long-term prospects of the office market.
• Undervalued Multiples: On a forward 12-month basis - EV/Sales, EV/EBITDA, and Price/Book Value multiples of the Globalworth Real Estate Investments Limited are currently lower as compared to the corresponding multiples of the Residential & Commercial REITs industry.
• Technical Indicator: From a technical standpoint, 14-day RSI (~42.84) reflects that it is still close to the oversold zone and supporting the upside potential.

Risk Assessments

• Operational Risk: The lower occupancy in portfolios can impact the Company’s operating income. Moreover, the market conditions are expected to remain challenging as new COVID-19 variants are emerging.
• Macroeconomic Risk: The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial and real estate markets. Adjacently, the anxiety over interest rates increase with a rise in US Treasury Yields can extend sell-off in the short-term.

Interim Results (for the six months ended 30 June 2021, as on 21 September 2021)

 (Source: Company Website)

• Strong Leasing: GWI reported a leasing transaction of 194,000 square meters (sqm) with 122 tenants during H1 FY21. The contract renewals represented 57.3% of total leasing activity in H1 FY21.
• Portfolio Growth: The total combined portfolio value increased by 1.3% to €3.1 billion as of 30 June 2021.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Book Value Approach (FY21) (Illustrative)

Conclusion

GWI has a strong portfolio value, strong asset management, and decent dividend yield to deliver significant value for its shareholders. Moreover, the economic activity is now expanding, and thus, GWI expects to pursue its expansion plans in Poland and Romania.

For H2 FY21, the primary focus of GWI will be the active management of portfolio of high-quality properties, so that the Company is able to quickly respond to new attractive opportunities. The stock made a 52-week high and low of EUR 7.50 and EUR 4.96, respectively.

Based on the continued strong total capital generation, decent pipeline of new propositions, solid balance sheet, supported by the valuation conducted above, we have given a “HOLD” recommendation on Globalworth Real Estate Investments Limited at the closing market price of around EUR 6.02 (as on 21 October 2021), while we look forward to taking fresh positions once the ongoing macroeconomic uncertainties fade away.

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

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

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

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