Business Overview
The United Kingdom-based Ramsdens Holdings Plc is engaged in the business of financial services and retailer. Its areas of operation are categorised into four segments like Forex, Mortgage-backed lending, procurement of precious metal and Jewellery Retailing. 

Recent News
On 8^th January 2020, the company announced its trading update for the financial year 2020.

Trading Update - FY2020
In the trading update for fiscal year 2020, the company announced that it has delivered strong performance and it has performed ahead of last year in its key business segments. The company expected its full year profit before tax to be ahead of the market expectations. High gold price resulted in the higher profits in precious metal segment. The company expected double digit revenue growth in the jewellery retail segment. The Group anticipated profit contribution of approximately GBP 0.8 million from stock scrapping for the full financial year.

Financial Highlights - H1 Financial Year 2020 (30^th September 2019, GBP, million)

(Source: Interim Report, Company Website)

In the first half of the fiscal year 2020, the Group’s revenue increased by 30 per cent to GBP 32.5 million as compared to GBP 25.1 million in the first half of the fiscal year 2019. EBITDA during the period increased by 49 per cent to GBP 8.5 million against 5.7 million in H1 FY2019. Profit before tax grew by 23 per cent to GBP 6.2 million versus GBP 5 million in H1 FY2019. Basic EPS during the H1 FY2020 was 15.9p, an increase of 22 per cent, as compared to 13p in the first half of the fiscal year 2019. The company declared dividend of 2.7p per share in the first half of the fiscal year 2020.

Share Price Performance  

Daily Chart as on 14^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 14^th, 2020, Ramsdens Holdings Plc shares were trading at GBX 247 at the time of writing before the market close (at 10:34 AM GMT), down by 1.60 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 260/GBX 155. The stock price has given44.02 per cent returns during the previous year. In the last one month, the stock price has given negative 4.44 per cent returns and now more correction in stock price is expected.

Valuation Methodology

*Peers: S&U Plc, Taaleri Plc, PCF Group Plc, Appreciate Group Plc, Morses Club Plc and Premier Miton Group Plc

Conclusion
The company has reported a decent financial performance in the trading update for the fiscal year 2019. However, these are already priced in and now some profit booking is expected at current levels. A major part of its revenue is generated in the UK, challenging environment in the UK could affect the Group’s revenue and impact the financial performance of the company. Failure in cybersecurity and a critical data breach could hamper the operations as well as the reputation of the Group. Any change in regulations and government policies could affect the overall business of the company. Fluctuations in foreign exchange rates and gold price could affect the profitability of the Ramsdens. Liquidity risk and the credit risk are the other potential risks which could impact the business performance of the Group.

Moreover, the company’s share price is trading near its 52-week high which raises doubt over its upside potential.

Based on the headwinds and the valuation methodology as done above, we have given a “Sell” recommendation at the current price of GBX 251.40 (as on 14th February 2020 before the market close at 9:17 AM GMT), based on 10.41x NTM Price/Earnings multiple (approx.) on FY20E earnings per share (approx.).
 
 
*All forecasted figures and information have been taken from Thomson Reuters.

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