Clinigen Group Plc

Clinigen Group Plc (LON: CLIN) is an FTSE AIM UK 50 index listed global Pharmaceutical and Services Company. The Company has sites in Europe, Asia Pacific, North America, and Africa.

Investment Highlights - Clinigen Group Plc – Speculative Buy at GBX 707.50

• In the medium-term, the Company expects to deliver future organic net revenue growth between 5–10% with an expected launch of a generic Foscavir in the EU.
• As per valuation metrics, EV/EBITDA, Price/Earnings and Price/Cash Flow multiples of the Clinigen Group Plc are currently lower as compared to the corresponding multiple of the Biotechnology & Medical Research industry. It reflects, shares are undervalued as compared to the industry.
• In the last three months, the Company has delivered a substantial return of ~22.43% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• From the technical standpoint, shares were trading well above the support level of 20-day simple moving average prices (GBX 696.30), which reflects an uptrend in the stock and can move up further.

Key Risks

• The Company needs to comply with stringent regulatory policies, and failure to do so could result in penalties and fines.
• It operates in a competitive environment and losing market share can affect the growth trajectory.

Trading Update for H1 FY2021 (31 December 2020) (released on 14 January 2021)

• In the first half of the financial year 2021, the Company expects net revenue to be around £230 million, reflecting an increase of 4% and 3% on net constant currency basis and reported basis, respectively, as compared to last year data.
• Due to a change in sales mix and impact of the covid-19, the operational leverage declined in H1 FY2021. The EBITDA is also expected to decline by 10% and 13% on a constant currency basis and reported basis, respectively.
• The net debt as on 31 December 2020 stood at £352 million, reflecting leverage of 2.8x and is below temporary banking covenant of 3.5x.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company expects revenue to improve on a reported and constant basis in the first half of the financial year 2021. While due to the impact of the covid-19 pandemic and change in sales mix, the EBITDA declined for the period. CLIN expects guidance for net revenue to remain unchanged, while growth is expected to be on the lower side of a medium-term range of 5% to 10%.  Despite the uncertain business environment, the Company has won new contracts and further strengthened the pipeline to accelerate business in FY2022. The long-term fundamentals of CLIN and its market appear to be strong despite short-term uncertainties. The stock made a 52-week low and high of GBX 350.40 and GBX 1,000.00, respectively.

Based on the decent prospects which are supported by valuation done using the above method, we have given a “Speculative Buy” recommendation for Clinigen Group Plc at the current price of GBX 707.50 (as on 20 January 2021, before the market close at 8:10 AM GMT) with lower double-digit upside potential based 13.12x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

AdEPT Technology Group Plc

AdEPT Technology Group Plc (LON: ADT) is an FTSE AIM All-Share Company, which independently provides managed services for unified communications, information technology, voice solutions and connectivity.

Investment Highlights - AdEPT Technology Group Plc – Speculative Buy at GBX 233.00

• In the H1 FY2021, ADT has shown resilient performance as the key performance indicators such as order intake, cash generation, and project delivery has been encouraging.
• The recent help to NHS in data network transition through HSCN connectivity will provide additional growth and will also help them to expand HSCN connectivity outside the UK.
• In the last one month, the Company delivered a decent return of ~5.38% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• From the technical standpoint, shares were trading well above the support level of 20-day simple moving average prices (GBX 222.65), which reflects an uptrend in the stock and can move up further.

Key Risks

• The uncertainties of Covid-19 pandemic and Brexit are also posing a risk to supply chains and margins.
• Furthermore, macroeconomic uncertainties can impact consumer confidence and reduce non-discretionary expenditures.

Recent News

On 11 January 2021, AdEPT Technology Group announced that it is helping NHS in data network transition through HSCN connectivity, which will provide faster connectivity at reduced cost with improved security.

Financial Highlights – H1 FY2021 (30 September 2020) (released on 17 November 2020)

(Source: Interim Report, Company Website)

• In the first half of the financial year 2021, total revenue decreased by 7.6% year-on-year, while the recurring revenue increased to 78% of total revenue.
• The profitability margins have declined for the period, reflecting lower revenue and higher operating expenses.
• As of 30 September 2020, net senior debt was £24.8 million, reflecting a reduction of £6.7million from H1 FY19.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the first half of the financial year 2021. Both the top-line and the bottom-line performance declined, while profitability margins declined. Looking forward, ADT believes that Covid-19 would continue to have a modest impact on the business in the medium to long term. However, AdEPT's client base is quite well-diversified across both the private and public sectors. The Company is looking to expand its services to accelerate digital transformation initiatives. Given the ongoing uncertainty, the Board was unable to provide guidance for FY2021. ADT continues to be highly generative along with supportive funding partners and investor base. Stock 52 week Low and High were GBX 160.05 and GBX 370.00, respectively.

Based on the factors discussed above, we have given a “Speculative Buy” recommendation on AdEPT Technology Group Plc at the current price of GBX 233.00 (as on 20 January 2021, before the market close at 9:20 AM GMT).

Tungsten Corp Plc

Tungsten Corp Plc (LON: TUNG) is a London, United Kingdom Company, which is engaged in e-invoicing, purchase order services, and financing business.

Investment Highlights - Tungsten Corp Plc – Speculative Buy at GBX 29.80

• During the first half of the financial year 2021, new business momentum continued with Tungsten securing 4 new customer wins.
• Despite the uncertainty, the Company is expecting to meet external forecasts for FY2021, based on new sales performance and current pipeline visibility.
• In the last one month, the Company delivered a decent return of ~3.29% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• From the technical standpoint, shares were trading well above the support level of 20-day simple moving average prices (GBX 29.60), which reflects an uptrend in the stock and can move up further.

Key Risks

• The ongoing Covid-19 mayhem may also impact the business growth trajectory in the near term.
• Failure to win or retain customers could affect the revenue and profitability of the Company.

Financial Highlights – H1 FY2021 (31 October 2020) (released on 14 December 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2021, the revenue declined by 1% to £18.0 million, while 93% of revenue was repeatable and recurring, compared to 94% in H1 FY2020.
• The Company witnessed an increase in operating loss for the period, reflecting an increase in FX costs, non-cash goodwill impairment and exceptional costs.
• At the period end, net cash of £1 million was broadly in line with H1 FY20, with £2.0 million remaining undrawn and available under the RCF, which will mature in December 2023.
• The Company also reported five new business wins from large multinational corporations delivering a total contract value of £1.3 million and annual recurring revenue of £0.3 million.

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 first half of the financial year 2021. Both the top-line and the bottom-line performance declined, while profitability remained in the negative zone. However, the trading performance in H1 FY2021 has been resilient with a strong pipeline in place, despite the challenging external environment. TUNG has secured further new customer wins and a strategic partnership agreement to expand the product offering. With a decline in transaction volumes, the Company now expects FY2021 revenues to be similar to FY2020. TUNG remained cautiously optimistic and expects business volumes to normalise in FY2022. The stock made a 52-week low and high of GBX 19.00 and GBX 45.00, respectively.

Based on the strong repeatable revenue, and support from the valuation as done using the above method, we have given a “Speculative Buy” stance on Tungsten Corp Plc at the current price of GBX 29.80 (as on 20 January 2021, before the market close at 8:00 AM GMT), with lower double-digit upside potential based on 1.17x 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.

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