Zotefoams PLC

Zotefoams PLC (LON: ZTF) is an FTSE All-Share listed cellular material technology Company, which focuses on the optimal material solution.

ZTF had paid an interim dividend of 2.1 pence per share on 08 October 2021, while the ex-dividend date will be 09 September 2021.

Investment Rationale for Valuation – Speculative Buy at GBX 463.00

• The Company had produced stellar H1 FY21 results with a significant increase in top-line revenue, bottom-line profitability, interim dividend, and reduction in net debt from the prior year levels.
• On the leverage front, the Company had managed to bring down the net debt to EBITDA ratio from 2.6x as of 30 June 2020 to 1.9x as of 30 June 2021.
• ZTF had reported a solid growth of around 66% in High-Performance Products ("HPP") sales during H1 FY21.
• The Company had commissioned its third major manufacturing facility in Poland during Q1 FY21, within timelines and budget.
• From a technical standpoint, the MACD line remained above the signal line, indicating an upside momentum in the stock price.

Key Risks

• The underperformance of the airline industry poses a threat to the Company.
• Any negative movement in the currency market could lead to an impact on the operating profits and margins of the company.
• The increased raw materials price and rising freight cost can create operational disruptions for the remainder of 2021.
  

H1 FY21 Financial & Operational Highlights (for the six months ended 30 June 2021, as of 10 August 2021)

(Source: Company result) 

• With regards to the top-line revenue, ZTF had shown approximately 39% growth during H1 FY21 as compared to H1 FY20, and an increase of around 14% when compared with an equivalent period of 2019.
• On the profitability front, the profit before tax had shown a robust increase of about 49% during H1 FY21.
• Driven by the strong growth and positive outlook, the Company had shown a marginal increase in the interim dividend payments. 

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

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

Conclusion

ZTF had shown resilient business performance across most of the geographies during H1 FY21. Moreover, it had enhanced the operational capabilities boosted by the strong recovery in the demand levels. Furthermore, the Company expects to build further positive sales momentum during H2 FY21. The growth in HPP products and recent sales price rises in polyolefin foams would act as a growth catalyst for ZTF. The stock made a 52-week low and high of GBX 350.00 and GBX 530.00, respectively.

Based on the strong H1 FY21 results, improvements in the leverage position, and valuation as done using the above method, we have given a “Speculative Buy” recommendation on Zotefoams PLC at the current market price of GBX 463.00 (as on 13 August 2021 at 07:15 AM GMT), with lower-double digit upside potential based on 35.24x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Supply@Me Capital PLC

Supply@Me Capital PLC (LON: SYME) is a fintech platform provider, offering Inventory Monetisation service to European Trading and Manufacturing Companies.

Investment Rationale – AVOID at GBX 0.422

• The Company is largely dependent on external funding to meet working capital requirements and can increase liquidity risk in the future.
• The Return on Equity and Return on Asset remained in the negative territory during H1 FY21.
• From a technical standpoint, a 14-day RSI of ~70.59 is falling in the overbought zone and indicating a correction in the stock price.
• Moreover, the stock price is hovering around the upper Bollinger band, indicating a correction in the stock price.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Conclusion

Based on the unfavourable technical indicators and weak profitability levels, we have given an “AVOID” recommendation on Supply@Me Capital PLC at the current market price of GBX 0.422 (as on 13 August 2021 at 08:37 AM GMT).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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