A G Barr Plc

AG Barr Plc (LON: BAG) is a FTSE All-Share listed manufacturer and seller of aerated water and soft drinks. The Company’s brands include RN-BRU, Rubicon and Funkin.

In August 2021, the Company will release its next trading update.

Rationale for Valuation – Speculative Buy at GBX 537.00

• G. Barr saw a strong balance sheet, with dividend payments to recommence.
• The current ratio has also stayed above 1.14x during the past three years, reflecting substantial liquidity to meet short-term obligations.
• On the leverage front, the Assets/Equity and the Debt/Equity have remained below the industry median of 2.69x and 0.70x, respectively.
• On a trailing 12 months, EV/Sales and Price/Book Value multiples of the A G Barr Plc are currently lower than the corresponding multiples of the Beverages industry.
• From a technical standpoint, 200-day SMA (GBX 489.00) supports an upside potential.

Key Risks

• The Company’s products are sold in several countries worldwide, which can create risks and uncertainties in multiple jurisdictions across developing and developed markets.
• Moreover, the Covid-19 pandemic has created extreme volatility in the short term as a result of the social restrictions implemented across the world.

AGM Trading Update (as on 28 May 2021)

• On a year-to-date basis (till 28 May 2021), the Company’s performance was in line with the Board’s expectations.
• Since the start of the new financial year (2022), Barr Soft Drinks trading has been relatively strong, supported by encouraging new product launches.
• The Company saw a positive impact on both the sales volume and mix as lockdown restrictions have eased.
• It witnessed a strong balance sheet, with the recommencement of dividend payments.

One Year Share Price Chart

 (Research Done by the Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Conclusion

The Company entered the financial year 2022 with an exciting innovation pipeline and resilient brand performance, supported by continuous investment in brand building. In the recent update, the Company stated that trading was in line with the Board's expectations. Meanwhile, the Company closed the financial year 2021 in strong financial health. BAG also stated that it had a clear intention to recommence dividend payments. BAG further developed the Energy market strategy and is focused on utilising digital platforms for changing market dynamics. The business has stayed strongly cash generative throughout the year. Overall, the Company is confident to make further progress in the coming year. The stock made a 52-week low and high of GBX 369.00 and GBX 550.00, respectively. On the technical chart, the next important support level is at GBX 469.00.

Based on the strong balance sheet and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on AG Barr Plc at the current price of GBX 537.00 (as on 3 June 2021 at 2:20 PM GMT) with a lower double-digit upside potential based on 26.39x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Batm Advanced Communications Ltd

Batm Advanced Communications Ltd (LON: BVC) is engaged in research and development of data communication products for medical laboratory systems.

Rationale for Valuation – Speculative Buy at GBX 81.90

• The Company has a strong balance sheet, which supports progressive dividend policy and potential acquisitions.
• BATM enters 2021 with confidence and momentum in the key focus areas of diagnostics and NFV.
• The current ratio has also stayed above 2.00x during the past three years, reflecting substantial liquidity to meet short-term obligations.
• The debt/equity ratio was 0.14x in FY20, lower than the industry median. Hence, the Company is less leveraged as compared to the industry.
• From a technical standpoint, 14-day RSI (29.25 level) supports an upside potential.

Key Risks

• The introduction of new technologies by competitors could have a negative impact on the market share of the Company.
• The Company is exposed to the effects of political and economic risks.

Recent News

On 18 May 2021, BVC started the delivery of two Covid-19 tests to Italy. The Italian public health authorities and the Olympics committee issued these two saliva-based RT-PCR test and rapid lateral flow test.

Financial Highlights (for the year ended 31 December 2020 (FY20), as on 19 April 2021)

(Source: Company Website)

• Total Group revenue increased by 49% YoY, with the gross margin improved to 33.1%.
• Led by higher revenue and gross profit, the adjusted operating profit surged by 183% YoY.
• The Company witnessed a strong increase in cash generation, due to the growth in profit and improvements in working capital.
• In 2020, the Company delivered excellent strategic progress in both business divisions.

One Year Share Price Chart

 (Research Done by the Kalkine Group)

Valuation Methodology: Price/Earnings (FY21E) (Illustrative)

Conclusion

The Company expects the Bio-Medical Division to stay the largest contributor to 2021 revenues, supported by the strong order book. In 2021, it expects revenue growth from continuing operations and to achieve further improvement in gross margin. BVC entered the year 2021 with strong solutions demand in both of the divisions. However, the Company’s operations were impacted by the uncertainty related to the covid-19 crisis. 

Meanwhile, the Company has shown robust financial performance in the financial year 2020. The Company has also established infrastructure to expand the business into new markets. The stock made a 52-week low and high of GBX 78.40 and GBX 150.50, respectively. On the technical chart, the next important support level is at GBX 67.00.

Based on the highly successful year, strong strategic and financial progress, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Batm Advanced Communications Ltd at the current price of GBX 81.90 (as on 3 June 2021 at 1:45 PM GMT) with a lower double-digit upside potential based on 46.62x Price/ Earnings (FY21E) (approx.) on FY21E earnings per share (approx.). 

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

*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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