RWS Holdings PLC – Complementary acquisitions expanded geographical reach and technology capability.

Established in the year 1958, RWS Holdings PLC is a FTSE AIM UK 50 Index listed Company, which is involved in intellectual property (IP) support services, patent translations, linguistic validation services, localization, and technical and commercial translations.

On 19 February 2021, RWS expects to pay its full-year dividend.  

Investment Highlights - Speculative Buy at GBX 570.16

• From a technical perspective, 20-day SMA (536.70) is supporting the upside potential.
• Over the past five years (FY15 to FY20), revenue and gross profit have surged at a CAGR of ~21.86% and ~30.07%, respectively.
• Going forward, the acquisition of Iconic and Webdunia shall provide access to award-winning niche machine translation and localization offering in the Indian and Asia Pacific markets, respectively.
• Recently, RWS also launched an online study and helping the global research community to assist pharmaceutical entities working on COVID-19 vaccines or treatments.
• RWS Holdings PLC has attractive and sustainable margins with consistent delivery of earnings growth, which is underpinned by the 16-year track record of constant growth in annual revenue and annual adjusted PBT.

Risk Assessments

• There is a credit risk associated with the financial loss of customers and liquidity risk arising from fluctuating interest and exchange rates.
• The Covid-19 pandemic has also disrupted the customer demand pattern.
• Moreover, the inability to integrate the acquired business successfully can create inefficiencies.

Financial Highlights for the year ended 30 September 2020 (as on 10 December 2020)

(Source: Company Website)

• Despite the global Covid-19 pandemic, the Group delivered good growth across Life Sciences and Moravia divisions in FY20.
• RWS has also undertaken two acquisitions in FY20 - Webdunia and Translation Machines.
• It also completed the acquisition of SDL post FY20 period end.
• The Board recommended a final dividend of 7.25 pence, an increase of 3.5% against FY19 final dividend of 7.00 pence.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

RWS has no debt despite recent bolt-on acquisitions. The integration of SDL shall strengthen its range of solutions. The Company is currently focusing on Life Sciences and technology customers, who are likely to be beneficiaries in a post-Covid-19 world. Moreover, joint-sell and cross-sell opportunities makes a promising pipeline for growth. RWS started FY21 positively and slightly ahead of expectations. The stock made a 52-week high and low of GBX 767.00 and GBX 399.71, respectively.

Based on the business capabilities, industry prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on RWS Holdings at the current price of GBX 570.16 (as on 25 January 2021, before the market close at 8:20 AM GMT), with lower-double digit upside potential based on 28.98x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

GlobalData PLC (LON: DATA) – FY20 outlook is in line with expectations with a continued strong performance.

GlobalData PLC is a FTSE AIM 100 quoted Company, which provides market data intelligence. It has been serving over 4,000 clients, including companies across various industries, financial institutions, government organizations and professional service firms.

Investment Rationale – Speculative Buy at GBX 1,270.00

• From a technical perspective, 90-day RSI (39.69) is reflecting an upward trend and upside potential.
• Despite the challenging trading environment, the Group is benefitted from considerable recurring revenue and demonstrated the advantage of a central operating model and a single product platform.
• Meanwhile, EBITDA margin and net margin have remained above 23.80% and 5.40%, respectively, over the last two half-years, which is substantially higher than the industry median.
• Over the past four years (H1 FY16 to H1 FY20), revenue and gross profit have surged at a CAGR of ~16.46% and ~23.03%, respectively.

Risk Assessments

• The Covid-19 pandemic has created unprecedented challenges and abnormal trading conditions.
• Moreover, the limited travel or gatherings have affected the events performance. Also, the business is exposed to unfavourable currency fluctuations.
• Adjacently, the Company debt level has increased recently, which can also create a liquidity risk. Further, the Group operates in highly competitive yet fragmented markets.

Recent News

5 January 2021: Bernard Cragg decided to step down as Chairman, and will be succeeded by Murray Legg with effect from the AGM.

Trading Update for the 10 months to 31 October 2020 (as on 25 November 2020)

• Despite the Covid-19 headwinds, revenue (excluding events) increased by 5% year-on-year (excluding events), due to an increase of 7% in subscription revenue in the 10 months ended 31 October 2020.
• Similarly, the forward contracted revenue surged by 8% year-on-year in the period.
• At the end of Q3 FY20 and the start of Q4 FY20, the strong momentum of sales order growth was seen.
• During the period, the adjusted EBITDA was up by 12% year-on-year, with an increase in the margin of 3 percentage points.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Cash Flow Approach (NTM) (Illustrative)

Conclusion

The Board appeared confident to sustain the strong trading momentum in November and December, and thus, deliver a strong finish to the FY20 and start the FY21 with a significant percentage of annual revenues already secure. GlobalData has continued to perform well as adjusted EBITDA was 12% up year-on-year for the 10 months to 31 October 2020, while the cash flow from operations was 8% up versus the previous period. The full year Adjusted EBITDA for the current financial year is expected to be in line with the Board's expectations. The Stock made 52-week High and Low of GBX 1,750.00 and GBX 830.00, respectively.

Based on the business capabilities, industry prospects and valuation conducted above, we have given a “Speculative Buy” recommendation on GlobalData PLC at the current market price of GBX 1,270.00 (as on 25 January 2021 before the market close at 8.50 AM GMT) with lower double-digit upside potential based 41.00x Price/Cash Flow (approx.) on FY20E Cash Flow Per Share (approx.).

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

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

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.

Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.