Tate & Lyle Plc

Tate & Lyle Plc (LON: TATE) is an FTSE 250 listed, British-headquartered Company, which provides solutions and ingredients for beverage, food, and industrial markets.

The Company will release the full-year results on 27 May 2021.

Investment Highlights - Tate & Lyle Plc – Hold at GBX 774.90

• Despite the uncertain environment, the Company has delivered strong performance reflecting cost discipline and excellent operational execution.
• As per valuation metrics, EV/Sales, EV/EBITDA and Price/Book multiples of the Tate & Lyle Plc are currently lower as compared to the corresponding multiples of the Food & Tobacco industry. It reflects, shares are undervalued as compared to the industry.
• In the last nine months, the Company delivered a decent return of ~18.49% and delivered higher returns compared to the benchmark Index (FTSE-250 Index).
• From the technical standpoint, shares were trading above the short-term support level of 20-day (GBX 769.00) simple moving average prices, which reflects an uptrend in the stock.

Key Risks

• The supply chain is at risk with global disruptive events, such as Covid-19, Brexit, and Trade disputes.
• The fluctuations in the raw materials price and availability of operating inputs could impact the profitability.

Recent News

On 25 March 2021, Tate & Lyle announced the selection of Vivid Sehgal as CFO (Chief Financial Officer) effective from 1 April 2021. Mr Sehgal will replace Imran Nawaz as CFO.

Trading Statement for 3 months ending 31 December 2020 (released on 28 January 2021)

(Source: Company Website) 

• For the three months period ending 31 December 2020, the revenue from Food & Beverage Solutions increased by 8%, reflecting benefits of continued growth from New Products and higher volume, good price and mix management.
• The revenue from sucralose declined by 3% for the period, due to customer mix and pricing pressure. Driven by phasing of customer orders, the volume was slightly higher.
• The volume of primary products increased by 4%. The volume of sweetener was higher, reflecting phasing of some customer orders, firmer demand and strong operational execution.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

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

Conclusion

The Company made strong strategic progress and delivered strong performance in the quarter ending 31 December 2020. Both Primary Products and Food & Beverage Solutions delivered top line growth, reflecting cost discipline and excellent operational execution. TATE expects adjusted profit before tax on constant exchange rate to be ahead of last year’s data, despite the impact of the covid-19 pandemic. The Company expects tax rate for FY2021 to be in between 12% to 14%, which resulted in higher adjusted earnings per share compared to FY2020 data. The business has positive momentum, while out-of-home consumption continues to be below pre-pandemic levels and operating environment remains uncertain. The stock made a 52-week low and high of GBX 587.20 and GBX 792.40, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for Tate & Lyle Plc at the current price of GBX 774.90 (as on 13 April 2021 at 10:42 AM GMT) and will recommend fresh buying at the right time.

Moneysupermarket.Com Group Plc

Moneysupermarket.Com Group Plc (LON: MONY) is an FTSE-250 listed Company, which provides price comparison services through three brands – TravelSupermarket, MoneySuperMarket, and MoneySavingExpert.

Investment Highlights - Moneysupermarket.Com Group Plc – Buy at GBX 268.80

• Despite the lower financial performance in the financial year 2020, the Company has a strong cash conversion and maintained full-year dividend.
• As per valuation metrics, EV/EBITDA, Price/Earnings and Price/Cash Flow multiples of the Moneysupermarket.Com Group Plc are currently lower as compared to the corresponding multiples of the Software & IT Services industry. It reflects, shares are undervalued as compared to the industry.
• In the last three months, the Company delivered a positive return of ~0.60% and delivered higher returns compared to the benchmark Index of negative 2.18% (FTSE-250 Index).
• From the technical standpoint, 14-day RSI is supporting an upside move (around 44 level), which means the stock price could increase in the short term.

Key Risks

• The Company may experience operational glitches, which may result in the transfer of incomplete or incorrect data to or from partners, which could negatively impact brands reputation.
• The operations may be impacted by an increase in the competition as it operates in a highly competitive and dynamic marketplace.

Financial Highlights – FY2020 (31 December 2020) (released on 18 February 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, due to the impact of the covid-19 pandemic, the Company’s revenue declined by 11%.
• Due to lower revenue and gross margin rate, the profitability for the period declined. The Company’s adjusted EBITDA declined by 24%.
• The Company has net cash of £23.6 million along with operating cashflow of £83.9 million as on 31 December 2020, reflecting strong cash conversion.
• Driven by robust cash generation and confidence in longer-term growth prospects, the Company maintained full-year dividend of 11.71 pence.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

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

Conclusion

The Company has shown a significant decline in financial performance in the financial year 2020. Both the revenue and profitability for the period declined. The Company’s end markets remained impacted by the covid-19 related restrictions and recovery pace in 2021 is dependent on easing in lockdown measures. MONY expects adjusted EBITDA to be in between £96.4 million to £128.8 million. The Company expects revenue and profit to recover strongly in the second half of the financial year 2021. Overall, the Company seems to be well-positioned to deliver growth in future and to navigate through an uncertain period. The stock made a 52-week low and high of GBX 233.79 and GBX 354.00, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “BUY” recommendation on Moneysupermarket.Com Group Plc at the current price of GBX 268.80 (as on 13 April 2021 at 11:00 AM GMT), with lower double-digit upside potential based on 23.29x Price/NTM Earnings (approx.) on FY21E earnings per share (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

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