Clarkson Plc

Clarkson Plc (LON: CKN) is a London, the United Kingdom-based integrated shipping service provider with their clients internationally.

Investment Highlights - Clarkson Plc – Speculative Buy at GBX 2,120.00

• The Company has shown strong financial performance and robust cash flows, which allow them to deliver dividend for 17 consecutive years.
• As per valuation metrics, EV/Sales and EV/EBITDA multiples of the Clarkson Plc are currently lower as compared to the corresponding multiple of the Freight & Logistics Services industry. It reflects, shares are undervalued as compared to the industry.
• Over the course of 4 years (FY15 – FY19), the Company’s revenue surged from GBP 301.80 million in FY2015 to GBP 363.00 million in FY2019. Compounded annual growth rate (CAGR) stood at ~ 4.72%.
• From the technical standpoint, 90-day RSI is currently supporting an upside move (around 46 level), which means the stock price could increase in the short term.

Key Risks

• The Company operates in a highly regulated market, and failure to comply with regulations could lead to a significant financial or reputational loss.
• The business performance is subject to uncertainties related to change in consumer trends, regulatory requirements, rapid technical innovation, and cybersecurity risk.

Recent News

On 7 October 2020, Clarkson announced the selection of Sue Harris, as independent Director Non-Executive from immediate effect. She will also succeed Marie-Louise Clayton as chair of the Audit and Risk Committee from 31 January 2021.

Financial Highlights – H1 FY2020 (30 June 2020) (released on 10 August 2020)

(Source: Interim Report, Company Website)

• In the first half of the financial year 2020, the Company witnessed an increase in revenue, driven by strong trading in the Broking division.
• The Company has decent profitability growth for the period, with improved earnings per share.
• Clarkson has a robust balance sheet, with free cash resources of £88.8 million as on 30 June 2020.
• The Company has paid a deferred final dividend for FY2019 of 53 pence and declared an interim dividend of 25 pence.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown robust financial performance in the first half of the financial year 2020. Both the top-line and the bottom-line performance improved, with higher profitability margins. CKN has produced strong cash flow, which allowed the Company to pay a final dividend and declared an interim dividend for 2020, delivering dividend growth for 17 consecutive years. At present, the Company is not able to provide any full-year guidance, while remaining confident of its market-leading position and range of services. The stock made a 52-week low and high of GBX 1,936.00 and GBX 3,135.00, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Clarkson Plc at the current price of GBX 2,120.00 (as on 9 November 2020, before the market close at 8:05 AM GMT), with lower double-digit upside potential based on 23.40x Price/NTM Earnings (approx.) on FY20E earnings per share (approx.).

Hotel Chocolat Group Plc

Hotel Chocolat Group Plc (LON: HOTC) is a food producer Company engaged in the business to manufacture and retail chocolate in the UK and abroad.

Investment Highlights - Hotel Chocolat Group Plc – Speculative Buy 340.20

• The Company strong revenue growth from digital channels and trading for the financial year 2021 stood in line with management’s expectations.
• In the last six months, the Company delivered a decent return of ~ 14.23% and delivered a significantly higher return compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, Price/Earnings multiple of the Hotel Chocolat Group Plc is currently lower as compared to the corresponding multiple of the Food & Tobacco industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 49 level), which means the stock price could increase in the short term.

Key Risks

• The launching of new operations might increase the regulatory risks for the Company.
• Liquidity and interest rate risks could affect the operations of the Company.

Financial & Operational Highlights – FY2020 (28 June 2020) (released on 29 September 2020)

(Source: Annual Report, Company website)

• For the financial year 2020, the Company’s revenue surged by 3%, reflecting revenue growth from digital channels.
• The Company showed lower profitability for the period, while Profit before tax and exceptional costs was ahead of expectations.
• The Company has a strong balance sheet position, with net cash of £28.1 million as on 28 June 2020.
• Hotel Chocolat Group witnessed an increase in resilience, capacity and flexibility while maintaining progress on strategic initiatives.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown a decline in financial performance in the financial year 2020. The revenue for the period improved, while profitability declined. The trading for the first 12 weeks of FY2021 stood in line with management expectations, with a significant increase in digital demand. The business is well-positioned to navigate Covid-19 challenges. As on 20 September 2020, the Company has a strong financial position, with liquidity headroom of £51.5 million and net cash of £16.5 million. The stock made a 52-week low and high of GBX 190.00 and GBX 527.00, 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 Hotel Chocolat Group Plc at the current price of GBX 340.20 (as on 9 November 2020, before the market close at 12:20 PM GMT), with lower double-digit upside potential based on 3.71x EV/NTM Sales (approx.) on FY21E sales (approx.).

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

*All forecasted figures and 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.