Blue Prism Group PLC

Blue Prism Group PLC (LON: PRSM) is a FTSE AIM UK 50 Index listed Company, which is a provider of the digital workforce using RPA (Robotic Process Automation) for blue-chip companies. The Group’s services and solutions are available in the cloud, on-premises, as a hybrid or integrated SaaS solution.

On 22 January 2022, PRSM expects to release its FY21 results.

Investment Rationale – EXPENSIVE at GBX 1,201.00

• On 17 June 2021, Blue Prism Group released its H1 FY21 results (for the six months ended 30 April 2021) and reported
  • Operating loss of £20.9 million (H1 FY20: £53.8 million restated). The EBITDA loss was driven by contingent share-based payments and exceptionals.
  • It ended H1 FY21 with lesser net cash position of £126.5 million (H1 FY20: £140.8 million).
• PRSM’s stock price has shown jump of over 40% in the past six months; however, it is not supported by the fundamentals. We will look to accumulate once bottom line turns more favourable. The profitability margins are in negative territory, showing significant underperformance against the industry median.
• The resurgence in the Covid-19 cases due to the delta variant can derail the economic recovery, while the markets are already dented with inflationary concerns, and early asset tapering by the US Federal Reserve.
• The economic downturn and market volatility can impact the level of activity in its end markets.
• From a technical standpoint, the stock price is in the overbought level as it has breached the upper Bollinger Band, while the momentum oscillator 14-day RSI (~85.08) reiterates the same.  

Share Price Chart

 (Data Source: REFINITIV, analysis done by Kalkine Group)

Conclusion

Based on the negative profitability margins, worsened losses, and macroeconomic uncertainties, we have given an “EXPENSIVE” recommendation on Blue Prism Group PLC at the closing price of around GBX 1,201.00 (as on 2 September 2021).

Batm Advanced Communications Ltd

BATM Advanced Communications Limited (LON: BVC) is engaged in research and development of data communication products for medical laboratory systems.

Investment Rationale – HOLD at GBX 92.10

• BVC projects FY21 revenue to be nearly 5% ahead of market expectations, driven by the stronger than expected ongoing demand for the Group's COVID-19 diagnostic solutions.
• On 18 May 2021, BVC commenced delivery of saliva-based RT-PCR test, which has demonstrated an advantage both commercially and medically.
• On the back of capital gain realised through the disposal of NG Soft, FY21’s EBITDA is likely to be more than 20% ahead of market expectations.
• From a technical standpoint, the Closing Market Price is sustaining above the 20-day EMA (GBX 89.40), reflecting a bullish price momentum.
• BVC has consistently reported better liquidity than the industry. Since FY17, quick ratio and current ratio have remained above 1.48x and 2.00x, respectively, reflecting significantly higher value than the industry median.

Key Risks

• The deterioration of economic conditions and operational disruption caused by the Covid-19 pandemic can cause raw-material and labour shortage.
• The termination of the relationship with material customers or partners can impact the revenue streams.

Recent News

Product Launch: On 12 July 2021, BVC’s Telco Systems subsidiary has launched Edgility, which is a networking network function virtualization-based ecosystem to support small office and home office market.

Interim results (for six months ended 30 June 2021, as on 23 August 2021)

 (Source: Company Website)

• During H1 FY21, revenue for Bio-Medical division and Networking increased by 10.2% year-on-year. However, revenue from Networking and Cyber division declined due to the disposal of non-core NG Soft Ltd subsidiary.
• In H1 FY21 vs H1 FY20, the Company reported 11.7% and 733.3% growth in gross profit and operating profit, respectively.
• The proceeds from the sale of NG Soft and higher gross profit boosted the cash position. Therefore, cash & cash equivalents and financial assets were stood at US$64.9 million on 30 June 2021 compared with US$53.4 million on 31 December 2020.

Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

Conclusion 

BVC has demonstrated robust financial performance in H1 FY21. Moreover, it has received several government contracts and signed some strategic partnerships in FY21 so far to sustain the strong momentum. The recent major contracts include

• On 5 July 2021, BVC received a contract worth US$10 million for an advanced cyber security solution from a government defence department customer.
• On 15 June 2021, BVC also received a US$4.1 million cyber security contract from a long-standing government customer.

Moreover, it has sustained strong trading momentum in FY21 by capitalising on robust demand for products of its Bio-Medical division. It has witnessed increasing demand in its key target areas for the solutions in both of its divisions. The Company has also established infrastructure to expand the offerings of its bio-medical division into new geographies. The strong demand for COVID-19 test kits and instruments shall boost the financials in FY21 as well. Therefore, the future looks bright for BVC, while it is likely to achieve further improvement in gross margins. The stock made a 52-week High and Low of GBX 135.56 and GBX 78.00, respectively. 

Based on the solid financial growth, strong demand for COVID-19 test kits, improvement in margins, recent contracts, and support from the valuation as done using the above method, we have given a “HOLD” recommendation on Batm Advanced Communications Ltd at the closing Market Price of GBX 92.10 (as on 2 September 2021).  

*All forecasted figures and Peer Information have been taken from REFINITIV.

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

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