Moonpig Group Plc

Moonpig Group Plc (LON: MOON) is listed on the FTSE 250 index. It is involved in the online greeting card and gifting business in the UK, the US, Australia, etc.

On 28 September 2021, MOON would conduct its Annual General Meeting.

Investment Rationale for Valuation – Speculative Buy at GBX 363.00

• The Company recently placed about 19.4 million of its ordinary shares.
• The Company has completed the rebuild of its proprietary technology and data platform.
• In FY2021, MOON’s revenue surged by 113% YoY.
• On the profitability front, MOON’s net margin in FY2021 outperformed the industry median of 2.5%.
• On the technical front, the 14-day RSI at about 35.45 is moving towards the oversold zone, indicating a potential uptick in the stock price in the near term.

Key Risks

• Customer purchase frequency is expected to slow down as per the industry experts, affecting MOON’s margins.
• There could be delays in the supply chain due to the delta variant of Covid-19 creating disruptions in the UK.
• Muted disposable income and lower consumer confidence could lead to a drastic change in consumer spending levels, affecting demand for the offerings of MOON.

Financial Highlights (for the year ended 30 April 2021 (FY2021), as of 27 July 2021)

(Source: LSE Website)

• Driven by new customer acquisition and higher purchase frequency, revenue in FY2021 surged 113% YoY.
• It resulted in a 107% YoY surge in adjusted EBITDA in FY2021.
• Driven by an adjusted operating cash conversion of 106%, the Company had an operating cash flow of £97.2 million in FY2021 compared to £51.0 million in FY2020.
• The Company expanded its database to over 190 million cumulative transactions.

One Year Share Price Chart

(Source: Refinitiv, Analysis done by Kalkine Group)

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

Conclusion

There is an improving outlook for the wider economy despite some uncertainty. The management takes confidence from the performance of the brand during challenging times and predicts sustained underlying growth. The Company continues to prioritise additional investments in marketing and market share capture. Meanwhile, the stock made a 52-week low and high of GBX 355.00 and GBX 499.95, respectively.

Based on the fundraising by the Company, its decent growth prospects, better profitability of the Company than the industry, and support from valuation as done using the above method, we have given a “Speculative Buy” recommendation on Moonpig Group Plc at the current market price of GBX 363.00 (as of 12 August 2021 at 7:05 AM GMT), with a lower double-digit upside potential based on 48.46x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Creightons Plc

Creightons Plc (LON: CRL) is involved in the manufacture and marketing of fragrances and toiletries.

Investment Rationale – Expensive at GBX 113.55

• Due to the spread of the delta variant of Covid-19, manufacturing activities could be disrupted for the Company.
• On the profitability front, the net margin since H2 FY2019 has been lower than the industry median of 9.4%.
• On the leverage front, the debt/equity ratio since H2 FY2019 has been higher than the industry median of 0.03x.
• The stock is trading near its 52-week high price of GBX 119.64, raising doubt about its upside potential from the current level. Hence, a correction in the near term cannot be ruled out.
• On the technical front, the 14-day RSI at about 74.97 is at the overbought zone, indicating a potential correction in the stock price in the near term.

One Year Share Price Chart

(Source: Refinitiv, Analysis done by Kalkine Group)

Conclusion

Based on potential disruption in manufacturing activities and poorer profitability and leverage position of the Company than the industry, we have given an “EXPENSIVE” recommendation on Creightons Plc at the current market price of GBX 113.55 (as of 12 August 2021 at 7:35 AM GMT). 

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

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

*The dividend yield is subject to change 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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