Informa Plc

Informa Plc (LON: INF) is an FTSE-100 listed Media Company. The Company is engaged in events, exhibitions, scholarly publishing, and information services.

The Company will release FY2020 results on 22 April 2021.

Investment Highlights – Informa Plc – Buy at GBX 490.90

• The Company accelerated virtual events and digital services in FY2020, with the integration of technology into physical event brands to improve customer relationships and providing intelligent B2B services.
• As per valuation metrics, Price/Cash Flow and Price/Book Value multiples of the Informa Plc are currently lower as compared to the corresponding multiples of the industry. It reflects, shares are undervalued as compared to the Media industry.
• Over the past four years (H1 FY16 to H1 FY20), revenue has surged from GBP 647.70 million in H1 FY2016 to GBP 814.40 million in H1 FY2020, reflecting a growth trajectory of ~5.89%.
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 38 level), which means the stock price could increase in the short term.

Key Risks

• The Company’s performance is also subject to fluctuations and volatility arising from the prevailing COVID-19 pandemic.
• The Company’s book business has shown increased disruptions due to supply-chain and product availability issues.

Recent News

On 6 January 2021, Informa announced the selection of John Rishton as Chair of the Company and will be succeeding Derek Mapp in June 2021.

Year-End Update for FY2020 (released on 6 January 2021)

• Despite the uncertainty and disturbance due to covid-19 pandemic, the demand for specialist knowledge and data remained strong in FY2020.
• The Subscription-led businesses performed strongly during the period and offset the significant disruption faced in physical events businesses.
• The Company completed stable and secure financing as a part of the covid-19 financing action plan, with the extension of earliest debt maturities to 2023.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company’s Subscription-led businesses have shown strength during the period, in both annualised contract values and renewal rates. In FY2020, INF integrated data and digital technology to physical event brands. The physical events in Mainland China make a progressive return, with an increase in contribution from virtual events, marketing services and specialist media activities. Informa expects full-year 2020 revenue to be in the range from £1.65 billion to £1.68 billion, with adjusted operating profit of £250 million to £270 million. Informa Intelligence is entering FY2021 with positive annualised contract values, high-quality subscription brands, robust new business pipelines and attracting high renewal rates. The Company is expecting physical event opportunities to arise as vaccine and testing programmes progress. The stock made a 52-week low and high of GBX 326.70 and GBX 826.60, 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 Informa Plc at the current price of GBX 490.90 (as on 29 January 2021, before the market close at 1:10 PM GMT), with lower double-digit upside potential based on 24.22x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Severn Trent Plc

Severn Trent Plc (LON: SVT) is an FTSE-100 listed Utility Company, which deals in providing water and waste-water services and developing renewable energy solutions.

The Company will release Q3 FY2021 trading update on 2 April 2021.

Investment Highlights - Severn Trent Plc – Buy at GBX 2,295.00

• The Company has a strong liquidity position and is planning to increase investment for the future.
• In terms of credit ratings, both Moody’s and Standard & Poor’s are on stable outlook with long-term credit ratings of Baa2 and BBB, respectively.
• As per valuation metrics, EV/Sales, Price/Earnings and Price/Cash Flow multiples of the Severn Trent Plc are currently lower as compared to the corresponding multiples of the Water & Related Utilities industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 39 level), which means the stock price could increase in the short term.

Key Risks

• The Company also operates in a strict regulatory framework, which can affect the pricing and performance.
• Moreover, the unfavourable economic conditions can lead to a non-recovery of customer debt and change in the commodity prices.

Financial Highlights – H1 FY2021 (30 September 2020) (released on 26 November 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2021, the Company’s turnover declined but stood in line with market expectations.
• The Company witnessed strong liquidity, with a sustainable bond issue of £300 million and a one-year extension of the RCF (£890 million of undrawn facilities).
• The Company delivered a strong operational performance, with 4 EPA accreditation from the Environment Agency, full-year ODI reward of at least £25 million and improvement in the UK customer satisfaction index scores.
• The Company announced an interim dividend of 40.63 pence, an increase of 1.5% as compared with the previous year.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company witnessed a decline in financial performance in the first half of the financial year 2021. Despite the challenging environment, the Company has resilient operational performance and has substantial liquidity with £890 million of undrawn facilities. SVT expects dividend for FY2021 to increase by 1.5% and remained in line with policy. The business remained financially strong, which gives confidence to the Company to increase investment for future growth. The stock made a 52-week low and high of GBX 1,994.50 and GBX 2,716.00, 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 Severn Trent Plc at the current price of GBX 2,295.00 (as on 29 January 2021, before the market close at 1:05 PM GMT), with lower double-digit upside potential based on 25.60x 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.

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