Restore Plc

Restore Plc (LON: RST) is an FTSE AIM 100 index listed Company, which provides document management and relocation services to offices and workplaces in the private and public sectors.

Rationale for Valuation – Speculative Buy at GBX 373.00

• RST expects a strong return to its proven growth trajectory in 2021 and beyond.
• It has a strong balance sheet and well-positioned to benefit from market acquisition opportunities.
• The Company gave a resilient performance in 2020, with reducing debt levels and providing a foundation for substantial growth.
• On the liquidity front, the current ratio was 1.23x in FY20, which was higher than the industry median.
• From a technical standpoint, 200-day SMA (GBX 352.74) supports an upside potential.

Key Risks

• The Company’s operations will remain impacted due to uncertain political and economic climate for short to medium term.
• The Company is exposed to credit and market risks, including impairments and allowances for credit losses.

Recent News

On 20 April 2021, the Company had acquired 100% of the share capital of Big Data Management Ltd.

Financial Highlights (for the year ended 31 December 2020 (FY20), as on 10 March 2021)

(Source: Company Website)

• Despite the challenging conditions, the Company achieved a resilient and profitable performance, supported by a strong bounce back in H2.
• During FY20, Restore did not propose any dividend and expected to reinstate dividends in FY21 with strong indications of recovery in the trading activity.
• The Company witnessed a strong cash generation with a reduction in net debt of £22.4 million.

One Year Share Price Chart

  (Source: Refinitiv, Thomson Reuters)

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

Conclusion

The Company acquired Big Data Management Ltd, which further steps into Restore's growth strategy via organic expansion and margin improvement through synergies and efficiency gains. In January and February, the Company’s performance was in line with the Board's expectations, trading at 90% of pre-COVID levels. Further, it is targeting organic growth across all business units by expanding market share, acquisition growth, and margin expansion with cost efficiencies driving from economies of scale. In Q1 FY21, the Company has completed two accretive Technology acquisitions. Moreover, the business is well-positioned to bounce back very strongly, with a further year of debt reduction. It is also actively investing for future growth. The stock made a 52-week low and high of GBX 280.00 and GBX 430.00, respectively. On the technical chart, the next important support level is at GBX 318.00.

Based on the factors discussed above, we have given a “Speculative Buy” recommendation on Restore Plc at the current price of GBX 373.00 (as on 28 April 2021 at 8:00 AM GMT) with a lower double-digit upside potential based on 22.16x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

LoopUp Group Plc

LoopUp Group PLC (LON: LOOP) is a FTSE AIM All-Share quoted Company, which provides premium cloud communications services. It has a global platform for business-critical external cloud communications, which facilitates cloud telephony, remote meetings, and managed events.

Rationale for Valuation – Speculative Buy at GBX 76.90

• The Company gave excellent numbers for 2020, with a strong balance sheet.
• The Company appears to be confident in its ability to achieve sustainable and profitable growth and intends to invest from its cash balance to maximise shareholder value creation.
• On a trailing 12 months, EV/Sales, EV/EBITDA and Price/Cash Flow multiples of the LOOP are currently lower than the Software & IT Services industry's corresponding multiples.
• In FY20, the Company has decent fundamental metrics as it has maintained a net margin above the industry median.
• From a technical standpoint, 14-day RSI (45.13 levels) supports an upside potential.

Key Risks

• The IT market’s remain highly competitive, and new players with differentiated products enter the market often, and if the Company is not able to provide similar services at a competitive price, it could lose business.
• Any downtime experienced at the data centre will impact the Company's services, and it could result in the loss of customer and reputation.

Financial Highlights (for the year ended 31 December 2020 (FY20), as on 30 March 2021)

(Source: Company Website)

• In FY20, the Company saw a strong trading year, with an increase in Group revenue of 18% YoY, EBITDA of 239% YoY and diluted EPS of 760% YoY.
• It witnessed a strong LPC (LoopUp Platform Capabilities) trading in 2020, with LPC revenue growth of 25% YoY.
• The Company launched LoopUp Rooms, a promotional 'freemium' plan and its internationally-differentiated Cloud Telephony capability.
• LOOP has shown a strong cash position, with a reduction in net debt.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: EV/Sales (NTM) (Illustrative)

Conclusion

The Company stated that it had acquired new customers, with a Total Contract Value of £620,000. Further, it launched a webcasting enhancement to the Managed Events capability. LOOP also stated that FY21 is set to be a transitional year for the Group. The cloud telephony market is expected to become a USD 26 billion market by 2024. Meanwhile, the strong growth achieved in FY20 will enable investment in the sustainable growth of recently augmented product offering, which allows customers to make and receive external calls via Microsoft Teams and expand the addressable market. Overall, the Board is confident in its ability to meet market profitability expectations for FY21, albeit at a potentially lower level of top-line revenue. The stock made a 52-week low and high of GBX 68.00 and GBX 250.00, respectively. On the technical chart, the next important support level is at GBX 64.80.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” stance on LoopUp Group at the current market price of GBX 76.90 (as on 28 April 2021 at 8:35 AM GMT), with lower double-digit upside potential based on 1.92x EV/NTM Sales (approx.) on FY21E sales (approx.).

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

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

Disclaimer

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