Anexo Group Plc - Reached record-high monthly cash collections in December

Anexo Group Plc (LON: ANX) is a FTSE AIM All-Share listed Company, which provides specialist integrated legal and credit hire services. The Company bifurcates the operations into four business units which are segregated under the two main divisions – Legal Services and Credit Hire.

On 27 April 2021, the Company will release its results for the year ended 31 December 2020.

Rationale for Valuation – Speculative Buy at GBX 130.06

• The Board anticipates overall cash collections for FY20 to be ahead of the prior year.
• Furthermore, the Credit Hire Division's activity level continues to be high, while the average number of vehicles on the road for FY20 is expected to surpass the figure for FY19.
• As per the valuation metrics, Price/Earnings, Price/Cash Flow, EV/Sales and EV/EBITDA multiples of the Anexo Group are currently lower as compared to the corresponding multiples of the Professional & Commercial Services industry.
• The Company has decent fundamental metrics as it has maintained a Net Margin above 13.6% for the last three years.
• From the technical standpoint, 14-day RSI stood at around 44.28, which is supporting the upside movement.

Key Risks

• The Company is exposed to credit and market risks, including impairments and allowances for credit losses.
• With the potential of another round of lockdown, there is a risk to activity level and cash collections as well.

FY20 Trading Update (in respect of the year ended 31 December 2020, as on 25 January 2021)

• Despite the Covid-19 pandemic, the revenue growth has surpassed the management's expectation.
• The adjusted profit before tax for FY20 will be in line with current market anticipations.
• In the credit hire division, the Company has recovered strongly and exceed the FY20 average number of vehicles on the road from the previous year.
• In Q4 FY20, the Company increased its monthly cash collections and arched a record high in December 2020.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

Despite the COVID-19 pandemic, the Board expects overall cash collections for the financial year 2020 to be ahead of the previous year. Further, Anexo expects to have a strong H2 FY20 performance for the Credit Hire division. The outlook for Legal Services division is also positive. The Company is actively seeking to expand the operations into new markets to diversify the revenue streams without compromising the focus on high-value customers and prospects. The stock made a 52-week low and high of GBX 100.00 and GBX 186.08, respectively.

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 Anexo Group at the current market price of GBX 130.06 (as on 27 January 2021, before the market close at 8:39 AM GMT), with lower double-digit upside potential based on 11.00 Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Immunodiagnostic Systems Holdings Plc – Operating with a strong balance sheet

Immunodiagnostic Systems Holdings PLC (LON: IDH) is a FTSE AIM All-Share listed Medical Equipment Company, which supports clinical laboratory market by developing and selling in-vitro diagnostics tests (IVD are diagnostic tests which are performed based on blood and serum).

Rationale for Valuation – Speculative Buy at GBX 220.00

• As diagnostics level recovered, swift recovery was seen during Q2 FY20.
• The Company also increased the installed base of IDS analysers.
• The Company has established its niche market in speciality endocrinology and now serving several indication areas.
• Since FY16, IDH’s current ratio has remained above 4.70x (significantly higher than the industry median), and debt/equity ratio has remained below 0.07x (industry median: 0.49x).
• As per the valuation metrics, EV/Sales multiple of the Immunodiagnostic Systems Holdings is currently lower as compared to the corresponding multiple of the Healthcare Equipment & Supplies industry.
• From the technical standpoint, shares are trading well above the short-term support level of 20-day (GBX 212.7) simple moving average price, which reflects an uptrend in the stock.

Key Risks

• It is exposed to the financial risk associated with liquidity issues, credit risk amid recessionary economic conditions, and the risk of fluctuating interest and exchange rates.
• The global financial crisis can lead to a limited funding opportunity.
• Moreover, the Brexit uncertainties can lead to trade barriers, shortage of skilled labour supply, and currency volatility.

Financial Highlights (for the six-month period ended 30 September 2020 (H1 FY21), as on 20 November 2020)

(Source: Company Website)

• For COVID-19 testing, the Company has launched a number of products in H1 FY21. Furthermore, automated assay menu increased by seven new assays.
• On a quarterly basis, the market for routine testing witnessed a drop of 35% during Q1 FY21, and 15% during Q2 FY21.
• Therefore, the unaudited revenue for H2 FY20 was 27% lower as compared to H1 FY20, due to the decrease in routine diagnostic testing levels.
• The adjusted EBITDA reported a loss of £0.8 million in H1 FY21 from a profit of £2.9 million in H1 FY20, driven by the lower revenues. 

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

Over the years, IDH has delivered excellence in endocrinology, with internal assay development, monetizing OEM, building expertise in new indication areas, and distribution opportunities, and continuously capturing strong market position with acquisitions and partnerships. Given the current onset of the second wave of COVID-19 infections, the Company needs to keep tight control on costs, though the market has shown recovery in Q2 FY21. Moreover, the decent trading in H1 FY21 demonstrates the business model's strength, while the Group has remained committed to investing in developing next-generation technology. Therefore, it is well-positioned for growth in the medium term. The stock made a 52-week low and high of GBX 160.00 and GBX 420.00, respectively.

Based on the decent growth prospects, we have given a “Speculative Buy” stance on Immunodiagnostic Systems Holdings at the current market price of GBX 220.00 (as on 27 January 2021, before the market close at 8:00 AM GMT).

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

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

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