Persimmon PLC

Persimmon PLC (LON: PSN) is an FTSE-100 listed company engaged in the housebuilding business across England, Scotland, and Wales. The Company operates under three brands – Persimmon Homes, Charles Church and Westbury Partnerships.

PSN will pay a dividend of 110 pence per share on 13 August 2021, while the ex-dividend date was 22 July 2021.

On 18 August 2021, PSN will release H1 FY21 results.

Investment Rationale for Valuation – HOLD at GBX 2,889.00

• During H1 FY21, PSN had reported an upward trend in the performance indicators like top-line revenue, legal completions, and cash as compared to the H1 FY20 levels.
• PSN expected that the long-term fundamentals of the UK housing market would remain strong.
• The Company had a strong track record paying consistent dividends to the shareholders as it recently announced the surplus capital distribution of 110 pence per share in the form of dividends to be paid on 13 August 2021.
• From a technical standpoint, PSN is hovering around the lower Bollinger band, indicating an upside potential in the stock price.

Key Risks

• The housebuilding business is cyclical in nature.
• The end of stamp duty relief may hamper the growth prospects of the housebuilding industry.
• The failure of partner relationships could adversely impact the business in the near term.
  

Recent Developments 

On 25 June 2021, PSN stated that it had appointed Shirine Khoury-Haq as a non-executive director with effect from 01 July 2021. 

H1 FY21 Trading update (for the six months ended 30 June 2021, as of 08 July 2021)

• The total revenue stood at £1.84 billion during H1 FY21 and remained significantly ahead of the H1 FY20 levels.
• Moreover, the forward order book at the end of June 2021 stood at £1.82 billion.
• PSN had delivered 7,406 new homes to the customers during H1 FY21.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

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

Conclusion

The Company took advantage of attractive land investment opportunities and purchased 10,000 new plots across 48 locations during H1 FY21. Moreover, PSN expects to operate around 300 sales outlets on average throughout the year. Meanwhile, the Company had shown significant improvements in the average selling price across the regional markets, which would continue to mitigate supply chain cost pressures. The stock made a 52-week low and high of GBX 2,249.61 and GBX 3,272.00, respectively. 

Based on the robust top-line business during H1 FY21 and valuation as done using the above method, we have given a “HOLD” recommendation on Persimmon PLC at the current market price of GBX 2,889.00 (as of 23 July 2021 at 09:41 AM GMT).

Idox PLC

Idox PLC (LON: IDOX) is an FTSE AIM All Share-listed provider of specialist management solutions, mostly to public sector companies around the world.

IDOX had paid a final dividend of 0.3 pence per share with respect to FY20 on 09 April 2021, while the ex-dividend date was 25 March 2021.

Investment Rationale for Valuation – HOLD at GBX 66.29

• With regards to the balance sheet, IDOX had strengthened its position as it delivered net cash during H1 FY21, while it had reported significant net debt at the end of H1 FY20.
• The Company had shown decent growth in top-line revenue and an outstanding increase in bottom-line profitability during H1 FY21.
• The recently completed acquisition of Aligned Assets would be expected to immediately earnings enhancing and drive the public sector software-focused growth strategy.
• IDOX had successfully exited from low margin Idox content business division through lucrative deals.
• From a technical standpoint, the stock price is sustaining above the 20-days exponential moving average of GBX 65.37, indicating an upside potential in the stock price.

Key Risks

• The profitability and cash flow of IDOX may decline in case the Company fail to deliver continued product development.
• The recent acquisition of Aligned Assets may not achieve desired synergies.
  

Recent Developments 

On 07 June 2021, IDOX stated that it had completed the acquisition of Aligned Assets for the initial cash consideration of £7.5 million to be paid from the existing resources.

H1 FY21 Financial & Operational Highlights (for the six months ended 30 April 2021, as of 15 June 2021)

(Source: Company result)

• The revenue from continuing operations rose by about 4% to £31.1 million during H1 FY21.
• The recurring revenue had slightly declined by 1% during the period.
• The adjusted EBITDA had shown a rise of about 17.0% to £10.1 million during H1 FY21.
• IDOX had witnessed a positive turnaround from reporting net debt of £14.3 million as of 30 April 2020 to delivering net cash of £7.6 million as of 30 April 2021.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

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

Conclusion

The sale of the Idox Content division had put IDOX into a strong cash position to make new strategic acquisitions and achieve strong organic growth. Furthermore, IDOX had carried the positive momentum of H1 FY21 into the second half as well, and it would gain expected synergy from the acquisition of Aligned Assets. Meanwhile, IDOX expects FY21 financial performance to remain slightly ahead of previous management expectations. The stock made a 52-week low and high of GBX 45.20 and GBX 79.00, respectively. 

Based on the strong H1 FY21 results, and valuation as done using the above method, we have given a “HOLD” recommendation on Idox PLC at the current market price of GBX 66.29 (as of 23 July 2021 at 09:30 AM GMT).

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

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

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