Naked Wines PLC

Naked Wines PLC (LON: WINE) is an FTSE AIM UK 50 index listed online wine retailer. The Company ships wine throughout the United Kingdom, United States, and Australia.

The Group will announce its results for the 52 weeks ended 28 March 2022 on 23 June 2022.

Investment Rationale for Valuation – Speculative Buy at GBX 282.00

• Trading Update: On 20 April 2022, the Group has reported that sales grew by 5% y-o-y in FY22, on a constant currency basis. Sales retention during the year stood at 80%, against a guidance of mid 70's.
• Increase in Customer Base: Active Angel Base (unique Angels, customers, who deposit funds into their Angel account) grew by 9% y-o-y to 964k in FY22.
• Cash & Inventory Profile: The company reported year-end cash at approximately £40 million in FY22, and inventory at approximately £143 million, up by £66 million compared to FY21.
• Technical Indicator: The price of the stock is trading close to the lower Bollinger band with 14-day RSI level of ~27.89, reflecting an oversold stance.

Key Risks

• Macro Concerns: The Bank of England has raised interest rates by 25 bps in its latest meet and has further fuelled concerns for recession.     
• Retention Risk: The company has a unique business model and is faced with the risk of retention of its customers.  

Financial Highlights (for the half-year to 27 September 2021, as of 18 November 2021)

(Source: Company Website)

• Sales: Total sales grew by 1% to £159.3 million in H1FY22, compared to H1FY21.     
• Turnaround in Profitability: The company posted a turnaround in performance and reported profit of £1.0 million in H1FY22, compared to a loss of £8.1 million in H1FY21.

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Book Value Approach (FY23E)

*Peers: Peers considered are Greggs PLC, Superdry PLC and Tesco PLC.   

*All selected peers are LSE-listed Companies from the Consumer sector.

Conclusion

Based on the decent performance in FY22, turnaround in profitability and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Naked Wines PLC at the current market price of GBX 282.00 (as of 17 June 2022, at 08:35 AM GMT+1) with lower double-digit upside potential based on 2.18x Price/NTM Book Value (approx.) on FY23E book value per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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