JD Sports Fashion Plc

JD Sports Fashion Plc (LON: JD.) is an FTSE 100 listed sports fashion retailer. The Company deals in multi-branded sports fashion and outdoor clothing along with footwear and equipment.

The Company will release Full-year 2021 results on 13 April 2021.

Investment Highlights – JD Sports Fashion Plc – Expensive at GBX 820.00

• Despite the improved performance, the Company expects operations to be materially impacted due to the impact of the covid-19 in FY2022.
• The Company’s debt/equity ratio has significantly increased at the beginning of the financial year 2020 and is higher than the industry median.
• In the last one month, the Company delivered a negative return of ~7.99% and delivered lower returns compared to the benchmark Index (FTSE-100 Index).
• From the technical standpoint, shares were trading below the short-term support level of 20-day (GBX 823.30) simple moving average prices, which reflects a downtrend in the stock and can decline further.

Key Risks

• The Company’s business is exposed to risks such as compliance risk, fraud, criminal activity and bribery, which could result in reputational damage.
• The Company may experience an increase in operating expenses due to disruptions in the supply chain.

Recent News

On 1 February 2021, JD Sports Fashion announced that it has entered into a conditional agreement with DTLR Villa LLC for 100% acquisition in the US for total cash consideration of $495 million. The completion of the acquisition is subject to customary closing conditions and is expected to complete during Q1 of 2021.

Trading Update ( released on 11 January 2021)

• The Company’s total revenue for 22 week period on like for like basis surged by 5% compared to last year’s performance for the same period.
• The Company witnessed a positive trend in demand during H2 FY2021 and expects headline profit before tax for FY2021 to be around £295 million and ahead of market expectations.
• The Company has scaled up the online platform and is confident of attracting more customers towards its

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown improvement in performance in the second half of the financial year 2021, with increased demand from online channels. The Company expects a strong improvement in financial performance in the financial year 2022. JD expects full-year profit before tax to be ahead of the current year by 5% to 10%. The Company expects covid-19 pandemic to be the material factor to have an impact on operational performance in the financial year 2022. Presently, the Company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of GBX 274.70 and GBX 923.20, respectively.

Based on the factors as highlighted above, we believe the stock of JD Sports Fashion Plc is “Expensive” at the current price of GBX 820.00 (as on 2 February 2021, before the market close at 1:25 PM GMT), with support from few catalysts needs to be evaluated at a later stage such as an improved focus on online business.

Seeing Machines Ltd

Seeing Machines Ltd (LON: SEE) is a technology hardware & equipment company enabling the machines to see, understand and assist people through the use of Artificial Intelligence (AI).

The Company will release H1 FY2021 results in March 2021.

Investment Highlights – Seeing Machines Ltd – Expensive at GBX 10.80

• Due to the covid-19 pandemic, the aviation industry is significantly impacted and did not see any momentum, which will have a significant impact on the Company’s operational performance.
• In the last week, the Company delivered a negative return of ~13.79% and delivered lower returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, EV/Sales, multiple of the Seeing Machines Ltd is currently lower as compared to the corresponding multiple of the Software & IT Services industry, reflecting overstretched valuations.
• From the technical standpoint, 90-day RSI is supporting a downside move (around 64 level), which means the stock price could decline in the short term.

Key Risks

• The Company operates in multiple geographies, and its profits can be impacted negatively due to foreign exchange rate fluctuations.
• To meet the new regulations, the Company needs to implement new processes, failing to do so would increase the compliance risk.

Trading Update for H1 FY2021 (31 December 2020) (released on 1 February 2021)

• The Company expects revenue for H1 FY2021 to be A$18.1 million, reflecting an increase of 14.6%, with total connected Guardian units of 26,597 as on 31 December 2020.
• The cash balance as on 31 December 2020 stood at A$52.7 million (30 June 2020: A$38.1 million).
• The Company’s DMS (Driver Monitoring System) technology continues to gain momentum and has been acknowledged by Regulatory and safety bodies in Europe, and the same trend is expected in the USA.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown decent performance in the first half of the financial year 2021, with growth in Aftermarket (Fleet) business. The Company developed strong engagement with OEM business and associated industries like Aviation and Automotive. SEE is encouraged by expanding ecosystem of partners in the Automotive sector, while the Aviation industry is facing momentum issues due to covid-19 pandemic. The trading for the financial year 2021 continues to be in line with the expectations. Despite the impact of the covid-19, the Company is confident in long-standing collaborations and will see growth in business in the near-term. The stock made a 52-week low and high of GBX 1.35 and GBX 13.29, respectively.

Based on the factors as highlighted above, we believe the stock of Seeing Machines Ltd is “Expensive” at the current price of GBX 10.80 (as on 2 February 2021, before the market close at 1:30 PM GMT), with support from few catalysts needs to be evaluated at a later stage such as increased momentum in Aviation business in near future.

Bidstack Group Plc

Bidstack Group Plc (LON: BIDS) is an FTSE AIM All-Share listed Company, is a provider of native in-game advertising for the global video games industry.

Investment Highlights - Bidstack Group Plc – Avoid at GBX 7.50

• The Company’s financial performance remained impacted due to the impact of the covid-19 pandemic.
• In the last one year, the Company delivered a negative return of ~35.17% and delivered lower returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, EV/Sales, multiple of the Bidstack Group Plc is currently lower as compared to the corresponding multiple of the Software & IT Services industry, reflecting overstretched valuations.
• From the technical standpoint, shares were trading below the short-term support level of 20-day (GBX 11.28) simple moving average prices, which reflects a downtrend in the stock and can decline further.

Key Risks

• The business activities may get hampered by any further increase in restrictions.
• The Company is undergoing various delays in its projects due to disruptions created by Covid-19 pandemic and Brexit.

Recent News

On 1 February 2021, Bidstack Group announced the acceptance of resignation of Derek Wise, Director Non-Executive, effective immediately.

Trading Update for FY2020 (31 December 2020) (released on 1 February 2021)

• The Company expects higher revenue in FY2020 of around £1.70 million (FY2019: £140 thousand), with higher LBT (loss before tax) of approximately £7.18 million (FY2019: LBT of £5.36 million).
• The cash balance as on 31 December 2020 is expected to be around £2.35 million (FY2019: £3.15 million).
• The net assets are expected to be around £2.45 million as on 31 December 2020 (FY2019: £3.61 million).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company expects financial performance to decline in the financial year 2020. Despite the higher top-line performance, the profitability margins will decline and remained in the negative zone. BIDS expects low cash balance and a decline in net assets during the period. Despite the lower expected performance, the Company made strong progress towards its ambition of becoming leading advertising and monetisation platform for interactive entertainment. At present, the Company is not able to provide any meaningful guidance for FY2021. Hence will provide detailed guidance with the publication of FY2020 results. The stock made a 52-week low and high of GBX 2.76 and GBX 14.20, respectively.

Based on its low profitability and weak prospects as discussed above, we have given the" Avoid" recommendation on Bidstack Group Plc at the current price of GBX 7.50 (as on 2 February 2021, before the market close at 8:15 AM GMT), while we will revisit our stance when the Company improves on profitability aspects.

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

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