Fevertree Drinks Plc

Fevertree Drinks Plc (LON: FEVR) is an AIM based beverages Company having operations in around 70 countries.

Investment Highlights – Fevertree Drinks Plc – Hold at GBX 2,455.70

• The Company has delivered strong off-trade performance, along with diversified revenue to mitigate the impact of covid-19 pandemic on on-trade business.
• The Company maintained the position of number one brand in mixer category at retail in the UK, and delivered strong performance in the US ahead of market expectations.
• In the last nine months, the Company delivered a significant return of ~92.00% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 48 level), which means the stock price could increase in the short term.

Key Risks

• The Company operates in a competitive industry, excessive competition could affect the profitability margins.
• Macroeconomic and political uncertainty could have a negative impact on the revenue of the Company.

Financial Highlights – H1 FY2020 (30 June 2020) (released on 8 September 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2020, despite a revenue decline of 11%, the revenue performance remained resilient.
• The profitability margins for the period declined, due to the impact of the covid-19 pandemic and increased investment in marketing.
• The net cash for the period stood at £136.9 million as on 30 June 2020, driven by support from asset light business model.
• The Company increased interim dividend payment by 4%, reflecting strong cash generation, confidence in the business and financial strength.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the first half of the financial year 2020. Both the top-line and the bottom-line performance declined, with lower profitability margins. The Company has a diversified revenue across channels and regions, and delivered strong Off-Trade performance. FEVR has a secure and strong financial position, which will enable them to remain focus on long-term growth opportunity. The Company managed to establish itself to market leading position in multiple key markets. The performance was impacted by the covid-19 pandemic. The Company expects revenue for FY2020 to be in between £235 million to £243 million. The stock made a 52-week low and high of GBX 888.40 and GBX 2,587.00, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for Fevertree Drinks Plc at the current price of GBX 2,455.70 (as on 5 January 2021, before the market close at 8:05 AM GMT) and will recommend fresh buying at the right time.

Arrow Global Group Plc

Arrow Global Group Plc (LON: ARW) is an FTSE All-Share listed Asset and Investment Management Company. It focuses on unsecured defaulted loan portfolios from various financial institutions.

Investment Highlights - Arrow Global Group Plc – Hold at GBX 185.00

• The Company has resilient cash collections, which reflect strong business continuity protocol and planning for covid-19, along with improvement in collections performance trend.
• The Management has taken actions to enhance liquidity and secures the balance sheet with proactive cost reduction to support lower collections for the short-term period.
• In the last six months, the Company delivered a significant return of ~130.12% and delivered higher returns compared to the benchmark Index (FTSE-all Share Index).
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 49 level), which means the stock price could increase in the short term.

Key Risks

• The Company’s business may be impacted by the risks related to liquidity and funding due to the impact of the covid-19 crisis.
• ARW can also enter into regulatory Scrutiny due to shock presented by the pandemic.

Financial Highlights – Q3 & 9M FY2020 (30 September 2020) (released on 12 November 2020)

(Source: Quarterly Report, Company Website) 

• For the nine months period, due to the Impact of the covid-19 pandemic, the Company’s total income declined significantly.
• The profitability margins declined significantly and remained in the negative zone for the period, driven by lower income.
• The Company maintained a strong liquidity position with cash headroom of £225.5 million (FY 2019: £153.0 million).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown a decline in financial performance in the first nine months period of the financial year 2020, while performance improved in Q3 FY2020. ARW has a resilient business model and continuing to service clients with strong levels of free cash flow. The Company expects COVID-19 will have a prolonged impact and will improve recovery in collections gradually. The Company expects medium-term outlook to be attractive based on increase in investment and asset servicing opportunities. ARW has also updated its targets for future period. The stock made a 52-week low and high of GBX 60.00 and GBX 306.80, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for Arrow Global Group Plc at the current price of GBX 185.00 (as on 5 January 2021, before the market close at 8:05 AM GMT) and will recommend fresh buying at the right time.

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

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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