Informa PLC

Informa PLC (LON: INF) is a FTSE 100 listed Media Company. It is engaged in events, exhibitions, scholarly publishing, and information services.

Investment Rationale – BUY at GBX 464.20

• 2021 Guidance re-confirmed: As the Group trading remained strong, INF expects to report the baseline revenue of at least £1.8 billion in FY21, while adjusted operating profit expected to be £375 million.
• Stable Fundamentals: Informa delivered robust free cash flow and shown positive forward bookings in H1 FY21. It also strengthened its balance sheet by reducing net debt significantly and maintained stable investment grade status from major credit rating agencies (Fitch, Moody’s and Standard & Poor’s).
• Undervalued Multiples: On a forward 12-month basis – EV/Sales, EV/EBITDA, Price/Earnings, and Price/Book valuation multiples are quite undervalued against the industry median of Consumer Cyclicals sector.
• Technical Indicator: From a technical standpoint, 14-day RSI (~30.88) is in the oversold territory, while the stock price is hovering close to the lower standard deviation of the Bollinger Bands.

Risk Assessments

• Covid-19 Impact: The rising cases of Omicron variant can lead to cancellation or postponement of events. Moreover, sales can be impacted by increased supply-chain disruptions and labour shortage.
• Macroeconomic Uncertainty: The ongoing economic instability with potential tightening of monetary policy, subdued consumer confidence, and currency fluctuations can also impact business performance.

Trading Statement (as on 17 November 2021)

• Growth Acceleration: The investment made in 2014-2017 Growth Acceleration Plan has resulted in underlying revenue growth and subscriptions-led business growth.
• Cash Flow Strength: It has prioritised operating cash flow, cash conversion and cash conservation as key measure, and thus, expects FY21 to end with over £325 million free cash flow (excluding divestment proceeds).
• Strong Trading: Its trading continued to improve across all businesses, and thus, the full-year guidance remained unchanged.

Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

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

 Conclusion 

Informa has bright prospects with continued growth subscription led business, further expansion in B2B digital services, return of physical events, and digital acceleration trends. The growth acceleration plan underpins the improvement in revenues, profits, and cash flow in the future.

Moreover, the FY21’s underlying revenue growth guidance has been increased from 4.5% to circa 6%, with over 6% expected in FY22. It reflects improving trends across the portfolio. The stock made a 52-week High and Low of GBX 603.60 and GBX 464.00, respectively.

Based on the raised revenue guidance, enhanced digital capabilities, reduced debt profit, business strength and resilience, supported by the valuation conducted above, we have given a “BUY” recommendation on Informa PLC at the current market price of GBX 464.20 (as on 30 November 2021, at 9:35 AM GMT), with lower double-digit upside potential based on 33.98x Price/NTM Earnings (approx.) on FY21E Earnings Per Share (approx.). 

Quartix Technologies PLC

Quartix Technologies PLC (LON: QTX) is an FTSE AIM All-Share listed entity that provides vehicle tracking systems and services to the fleet and insurance sectors.

Investment Highlights – SPECULATIVE BUY at GBX 336.00

• Positive Outlook: QTX projects FY21 financials to be in line with the market expectations on the back of strong subscription. As economic activities are gaining pre-Covid-19 momentum, it shall support the business prospects going forward.
• Improved Dynamics: The economic reopening has boosted traffic on roads leading to the increase in insurance buyers and the requirement for vehicle tracking systems.
• Technical Indicator: From a technical standpoint, 14-day RSI (~18.17) indicating an oversold scenario, while the stock is hovering around the lower Bollinger Band.
• Better Profitability: In H1 FY21, net margin and return on equity were higher than the industry median of 10.5% and 9.6%, respectively.

Key Risks

• New Car Sales Slump: British new car registrations reported a 25% year-on-year drop in October 2021 due to lack of semi-conductor chips, which can eventually impact the Company’s business.
• Weak Insurance Market: The UK’s motor insurance premiums plunged 16% in Q3 FY21, while the mobility restrictions, subdued new car sales, and fuel crisis can keep the market volatile.

CEO Succession Update and Trading Update (as on 13 October 2021)

(Source: Company Website)

• Subscription Growth: During 9M FY21, new subscription surged 22% year-on-year, primarily driven by 35% year-on-year growth in France.
• Strong Recurring Revenue: The annualised recurring revenue of the fleet subscription base gained by £1.5 million since the start of FY21.
• CEO Succession: Richard Lilwall commenced his appointment as CEO (Chief Executive Officer) and joined the Board of QTX.

One Year Share Price Chart

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

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

Conclusion

The concerns regarding the Omicron variant of coronavirus, British inflation worries, soaring energy prices, labour shortages, and logistical issues can dampen the investor sentiments against this penny stock.

However, the new CEO of QTX has commenced its operations and sees attractive potential in the telematics market. Meanwhile, QTX has grown its subscription base in new territories also. Subsequently, FY21’s revenue, profit, and cash flow are expected to be in line with the market expectations.

Nevertheless, subscribers should scan their risk-return profile before punting on this speculative stock amid poor new car sales in October 2021. The stock made a 52-week high and low of GBX 580.00 and GBX 330.00, respectively.

Based on the fleet revenue increase, resilience profitability, increased subscription, with support from the valuation as done using the above method, we have given a “SPECULATIVE BUY” recommendation on Quartix Technologies PLC at the current market price of GBX 336.00 (as on 30 November 2021 at 09:22 AM GMT), with lower double-digit upside potential based 48.64x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

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

*All forecasted figures and Peer 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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