Bunzl Plc

Bunzl Plc (LON: BNZL) is a FTSE 100 Index listed International Distribution Company, which provides customised solutions to B2B customers. The operations of the group are differentiated in four geographical segments, namely North America, the Rest of the World, Continental Europe, and the UK & Ireland.

Rationale for Valuation – Hold at GBX 2,453.00

• The Company announced three acquisitions lately. Furthermore, it has a 27-year track record of consecutive dividend growth.
• In FY21, the Company continues to expect strong revenue growth compared to the prior year.
• The Company has decent fundamental metrics as it has maintained a ROE (return on equity) above 20% for the last three years.
• On a trailing 12 months, EV/Sales multiple is currently lower than the Diversified Industrials Goods Wholesale industry.
• From a technical standpoint, 200-day SMA (GBX 2,321) supports an upside potential.

Key Risks

• Bunzl operates in a highly competitive markets and faces intense pricing competition, which can put pressure over margins.
• The unexpected increase in cost due to foreign currency fluctuations and higher trade tariffs can also impact profitability.
• Furthermore, the growth trajectory can be affected if the Company fails to acquire new businesses or integrate the acquired businesses successfully.

Q1 FY21 Trading Update (as on 21 April 2021)

• In the first quarter, Group revenue increased by 10.4% at constant exchange rates and 5.4% at actual exchange rates.
• Underlying revenue was in line with the Group's expectations, while it has shown a growth of 1.4% at constant exchange rates.
• The Company has a decent adjusted operating margin, underpinned by demand for certain Covid-19 related products.
• In North America and the Rest of the World, it witnessed a good underlying revenue performance, driven by demand for Covid-19 related products.
• However, Continental Europe and UK & Ireland performance were impacted by the effect of Covid-19 pandemic-related restrictions.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

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

Conclusion

In FY21, the Company expects robust revenue growth (compared with the previous year), supported by a recovery in sales of other products. For FY21, the Group adjusted operating margin is expected to return to a more historical level. Further, the recent acquisitions will contribute to the Group's performance in 2021. In the first half of 2021, the Company expects good organic revenue growth (excluding larger Covid-19 related orders). Meanwhile, Bunzl has a well-diversified business model which is spanned across six sectors and 31 countries. Overall, there are significant opportunities for future growth through expansion in new geographies and new sectors. The stock made a 52-week low and high of GBX 1,609.50 and GBX 2,710.00, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance on Bunzl Plc at the current price of GBX 2,453.00 (as on 22 April 2021 at 8:05 AM GMT) and will recommend fresh buying at the right time.

Rambler Metals and Mining Plc

Rambler Metals and Mining PLC (LON: RMM) is a FTSE AIM All-Share listed Copper and Gold producer, which has 100% ownership in the Ming Copper-Gold Mine.

Rationale for Valuation – Avoid at GBX 0.542

• On a trailing 12 months, the Company’s EV/EBITDA and Price/Earnings metrics are in the negative zone as compared to the Metals & Mining industry multiples.
• The Company’s profitability metrics are in negative territory, whereas the industry has been delivering positive numbers.
• The Company is dependent upon funding through external sources to run its business operations.
• From the technical standpoint, 14-day RSI is in the over-bought territory, which means that the stock price could decline in the short term.

Key Risks

• The Global Covid-19 pandemic could result in the suspension of operations and increase labour absenteeism, and thus, the operation costs.
• Moreover, there are several financial risks associated with fluctuation in the foreign exchange & interest rates, availability of adequate working capital, and credit defaults.
• The commodity price fluctuations can impact the cash flows of the Company.
• The volatility in metals prices and demand, cash operating cost per pound sold, and variances in ore grade or recovery rates could also impact the operational and financial performance.

Recent News

On 13 April 2021, the Company has closed the asset sale agreement with Maritime Resources.

Financial Highlights (for the half-year ended 30 June 2020 (H1 FY20), as on 28 September 2020)

(Source: Company Website)

• The H1 FY20 period was impacted by Covid-19 pandemic, and thus, the copper price fell drastically. Therefore, revenue declined to USD 12.7 million.
• The copper production fell 20% against the same period last year.
• The average price for gold was USD 1,649 (H1 FY19: USD 1,309) per ounce, and copper was USD 2.61 (H1 FY19: US$2.78) per pound.
• During the period, the cash production costs stood at USD 14.1 million, and the net direct cash costs net of by-product credits were USD 3.21 per pound of saleable copper.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

Conclusion

RMM has been continuously monitoring Covid-19 impact on operations and copper prices. As of 30 June 2020, the Company had a cash balance of US$0.81 million, and further, it has secured financing to fund the capital plan and repayment of borrowed money. However, the Company is in the development stage. The profitability margins declined or remained stagnant. Moreover, there are several risk and uncertainties regarding commercial operations, currency fluctuations, and copper price volatility. Therefore, in the absence of enough growth catalysts, we do not suggest punting on this stock, as of now. The stock made a 52-week low and high of GBX 0.201 and GBX 2.00, respectively. 

Based on the headwinds faced by the Company, we have given an “Avoid” recommendation on Rambler Metals and Mining at the current price of GBX 0.542 (as on 22 April 2021 at 8:15 AM GMT).

*All forecasted figures and Peers/Industry information have been taken from Refinitiv, Thomson Reuters.

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

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.