Supermarket Income REIT Plc

Supermarket Income REIT Plc (LON: SUPR) is the UK-based real estate investment trust focusing on grocery properties. The Company makes investment in supermarkets and online channels to generate inflation-protected secure long-term returns.

Investment Highlights - Supermarket Income REIT Plc – Speculative Buy at GBX 107.20

• The Company confirmed the receipt of 100% of the contracted December 2020 quarterly rent payments.
• In the last one year, the Company delivered a decent return of ~2.59% and delivered higher returns compared to the benchmark Index (FTSE-all Share Index).
• As per valuation metrics, the Price/Earnings multiple of the Supermarket Income REIT Plc is currently lower as compared to the corresponding multiple of the Residential & Commercial REITs industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is in the oversold zone and is supporting an upside move (around 22 level), which means the stock price could increase in the short term.

Key Risks

• The Covid-19 crisis and Brexit can cause supply chain issues to the grocery sector.
• Adverse market conditions can significantly impact property valuations.

Recent News

On 4 March 2021, Supermarket Income REIT announced the offer for subscription of new shares of £0.01/share in the Company’s capital through the PrimaryBid platform. The Company is targeting £100 million of fundraise through issue of 94,339,622 New shares.

On 4 March 2021, Supermarket Income REIT announced the acquisition of Prestatyn, North Wales based Tesco supermarket for £26.5 million from Ediston Property Investment Company.

Financial & Business Highlights – H1 FY2021 (31 December 2020) (released on 2 March 2021)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2021, the Company’s direct portfolio value increased by £345.9 million to £885.3 million.
• The Company acquired 13 complementary omnichannel supermarket assets in past six months ending 31 December 2020.
• The Company’s NTA (Net Tangible Asset Value) stood at 104 pence in H1 FY2021, reflecting an increase of 3%.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

*Peers: Great Portland Estates Plc, Derwent London Plc, St Modwen Properties Plc, Workspace Group Plc and Land Securities Group Plc.

Conclusion

The Company has shown an increase in financial performance in the first half of the financial year 2021. Both the rental income and profitability for the period improved. Supermarket Income is encouraged by robust portfolio performance and reaffirmed 100% rent collection each quarter. The Company has a diverse portfolio of UK supermarket assets with a long lease and quality tenant covenants. The highly specific investment strategy of the Company continues to provide investors with long-term, stable and inflation-protected income. Supermarket Income REIT real estate assets remain amongst the compelling asset classes in the investment market in the UK. The stock made a 52-week low and high of GBX 88.00 and GBX 113.00, 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 Supermarket Income REIT Plc at the current price of GBX 107.20 (as on 5 March 2021, before the market close at 8:15 AM GMT), with lower double-digit upside potential based on 21.22x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Nichols Plc

Nichols Plc (LON: NICL) is a well-established soft drinks Company, which serves in over 85 countries. The Company offers various brands under its portfolio, including Vimto, Starslush, Feel Good, FRYST, LEVI Roots, Sunkist and ICEE.

Investment Highlights - Nichols Plc – Speculative Buy at GBX 1,115.00

• The Company witnessed strong performance from Vimto brand in the UK market and shown good performance in the international business.
• In the last week, the Company delivered a decent return of ~7.40% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, the EV/Sales and Price/Book Value multiples of the Nichols Plc are currently lower as compared to the corresponding multiples of the Beverages industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 90-day RSI is in the oversold zone and is supporting an upside move (around 14 level), which means the stock price could increase in the short term.

Key Risks

• The soft drink market is a highly competitive market which is heavily driven by promotions, and hence, any negative publicity can massively hit brand performance.
• Other risks such as failure to expand portfolio due to the rising health concerns and inventory shortage due to supply chain disruption presented by COVID-19 mayhem, could hamper the operational and financial performance.

Financial Highlights – FY2020 (31 December 2020) (released on 3 March 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, due to the restrictions related to covid-19 pandemic, the revenue declined by 19.3%.
• The Vimto brand delivered strong growth across the UK, Middle east, Africa and other international markets.
• The profitability for the period declined significantly, driven by lower revenue and higher fixed costs.
• The Company has a strong cash performance with Cash Conversion at 186% and free cash flow increased by £17.6 million.
• To cover 2x for combined 2019 and 2020, the Company proposed a final dividend of 8.8 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 a decline in financial performance in the financial year 2020. Both the top-line and the bottom-line performance declined. Despite the impact of the covid-19 pandemic, Nichols remained encouraged by the solid performance delivered by Vimto business in the UK and other International markets with market share gain. At present the Company expects market to remain uncertain and is not able to provide any guidance, while remained confident towards long-term outlook based on diversified business model and strength of the Vimto brand. Nichols has taken multiple measures to control operational and overhead costs with an aim to build better business post the pandemic. The stock made a 52-week low and high of GBX 858.00 and GBX 1,450.00, 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 Nichols Plc at the current price of GBX 1,115.00 (as on 5 March 2021, before the market close at 8:48 AM GMT), with lower double-digit upside potential based on 27.98x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Immunodiagnostic Systems Holdings Plc

Immunodiagnostic Systems Holdings Plc (LON: IDH) is an FTSE AIM All-Share listed Medical Equipment Company, which supports the clinical laboratory market by developing and selling in-vitro diagnostics tests.

Investment Highlights - Immunodiagnostic Systems Holdings Plc – Speculative buy at GBX 200.00

• The Company has seen a significant recovery in revenue in the second quarter of the financial year 2021, and is focused on reducing costs.
• The Company has a strong liquidity position for H1 FY2021 with current ratio of 5.40x, which is higher than the industry median of 2.15x. The Company has strong liquidity position for last 5 years.
• As per valuation metrics, the EV/Sales and Price/Book Value multiples of the Immunodiagnostic Systems Holdings Plc are currently lower as compared to the corresponding multiples of the Healthcare Equipment & Supplies industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is in the oversold zone and is supporting an upside move (around 6 level), which means the stock price could increase in the short term.

Key Risks

• The Company’s revenue is impacted by increased competition in the healthcare sector.
• Global political uncertainty regarding the trade policy also poses a risk for the group, including protectionist measures and regulation or legislation in local markets.

Financial Highlights – H1 FY2021 (30 September 2020) (released on 20 November 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2021, due to the decrease in routine diagnostic testing levels, the unaudited revenue declined by 27% in H1 FY2021.
• Due to lower revenue and higher R&D costs, the profitability for the period declined. The Company reported a negative adjusted EBITDA of £750 thousand in H1 FY2021.
• The cash balance as on 30 September 2020 declined to £24,178 thousand (31 March 2020: £27,584 thousand).

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 revenue and the profitability for the period declined, with lower cash position. Despite the lower performance, IDH seen improvement in revenue trajectory in Q2 FY2021, as business recovered from the impact of covid-19. The Company believes the market to remain uncertain and might evolve, while remained confident on the position of the Company to return to growth as the global situation improves. The Company has a strong balance sheet position to tackle an uncertain period. The stock made a 52-week low and high of GBX 160.00 and GBX 420.00, respectively.

Based on the decent growth prospects as discussed above, we have given a “Speculative Buy” stance on Immunodiagnostic Systems Holdings Plc at the current price of GBX 200.00 (as on 5 March 2021, before the market close at 11:12 AM GMT).

*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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