Numis Corporation PLC

Numis Corporation PLC (LON: NUM) is a FTSE AIM UK 50 index listed independent institutional stockbroker and corporate advisor.

On 8 December 2021, Numis expects to release final results for FY21.

Rationale for Valuation – SPECULATIVE BUY at GBX 348.00

• The UK economy bounced back in Q2 2021, reflecting a sign of recovery as the global economy reopens.
• The revenues from Investment Banking division have grown considerable to £150 million in FY21 (FY20: £101.7 million).
• M&A and private markets transactions contributed significant revenue and market share gains.
• From a technical standpoint, the stock price is trading below the lower standard deviation of the Bollinger Bands, while the RSI (~42.24) confirms the oversold position.
• On forward 12-month basis – EV/Sales, EV/EBITDA, and Price/Cash Flow valuation multiples of Numis are undervalued against the Investment Banking & Investment Services sector.

Key Risks

• If the debt limit caps doesn’t increase in the US, it can crate cash crunch for the government.
• The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial markets.
• British inflation rose to its highest in 10 years, while the strengthening of US Dollar with an increase in US Treasury Yields can hinder the NUM’s growth prospects.
• The Company is also exposed to market risk with high volatility in equity market, and loss of clients with subdued investors’ sentiments.

Trading Update (for the year ending 30 September 2021, as on 30 September 2021)

• Numis delivered a strong performance in Q4 FY21 and maintained its positive momentum.
• Revenue for H2 FY21 is expected to be higher than H2 FY20, reflecting a significant volume of COVID related capital markets transactions.
• FY21 revenue is expected to be around £215 million (FY20: £154.9 million), and thus, profits are expected to be higher than FY20.

Share Price Chart (since 02 February 2021)

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

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

Conclusion 

Given the favourable market backdrop, the Group has increased its capital allocation and delivered growth in top-line and bottom-line items. The Group also experienced market share gains, resilient research payments, and good activity levels in UK equities. Numis’ pipeline also remained robust, and the wider market outlook is positive. It also expects to launch several IPOs in FY22, and continuing progress on its strategic priorities. The stock made a 52 week High and Low of GBX 419.86 and GBX 286.00, respectively.

Based on robust revenue growth, strong profit generation, significant progress on strategic priorities, favorable market dynamics, supported by the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Numis Corporation PLC at the current market price of around GBX 348.00 (as on 7 October 2021, at 8:00 AM GMT+1), with lower double-digit upside potential based 9.69x Price/Earnings (approx.) on FY21E Earnings Per Share (approx.).

Tpximpact Holdings PLC

Tpximpact Holdings PLC (LON: TPX) is a FTSE AIM All-Share listed digital transformation service provider to the UK public services sector.

Investment Rationale – SPECULATIVE BUY at GBX 231.30

• The Board has raised its revenue guidance on the back of strong trading performance in the first five months of FY22.
• The demand for digital transformation services remained robust across the Group's end markets, reflecting the impact of strengthened capabilities through recent acquisitions.
• The order intake jumped 177% in the five-month period from 1 April 2021 to 1 September 2021, as compared to the equivalent period in FY21.
• Merck’s game changing Covid-19 pill can reduce hospitalization by half, which can bring workers back to work and reduce supply chain issues.
• From a technical standpoint, 14-day RSI (~30.48) is in the oversold territory, while the stock price is hovering below the lower standard deviation of the Bollinger Band.
• On forward 12-month basis – EV/Sales, and EV/EBITDA valuation multiples of TPX are undervalued against the Technology sector.

Risk Assessments

• The strengthening of the US Dollar and rising US Treasury Bond Yield can cause exchange rate risk.
• The travel restrictions can have an impact on new business and pipeline opportunities.
• The lengthening of the sales cycle could have an impact on cash flows. Adjacently, increased competition can affect the Company's leadership position and its growth trajectory.

Recent News

Change of Name and Website: On 1 October 2021, the Completed the change of its name to TPXimpact Holdings PLC (previously The Panoply).

Trading Update (for the five-month period from 1 April 2021 to 1 September 2021, as on 15 September 2021)

• TPX reported strong trading in the above-mentioned period and won new contracts of approximately £50 million.
• The utilities sector represented a significant win of £10.0 million in value for over five years.
• For FY22, organic revenue growth is expected to between be 15-20%, while the total revenue for FY22 shall be in the excess of £77 million.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative) 

Conclusion

TPX raised revenue guidance for FY22, in the light of strong trading and growing market opportunity. It also has a strong pipeline, and thus, it expects to see Adjusted EBITDA margin expansion in coming years. It also made significant progress in moving to a single brand strategy and delivered large projects with expanded capabilities and accelerated momentum. The Group has witnessed a clear demand for its digital transformation services and looks confident to take advantage of the significant opportunities ahead.  The stock made a 52-week high and low of GBX 325.00 and GBX 94.80, respectively.

Based on the strong trading, significant order intake growth, high demand, raised guidance, and, supported by the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Tpximpact Holdings PLC at the current market price of GBX 231.30 (as on 7 October 2021, at 9:00 AM GMT+1), with lower double-digit upside potential based on 30.74x Price/NTM Earnings (approx.) on FY22E Earnings Per Share (approx.).

*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).

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

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

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