Numis Corporation PLC

Numis Corporation PLC (LON: NUM) is an FTSE AIM UK 50 index listed independent institutional stockbroker and corporate advisor.

On 06 May 2022, NUM will release H1 FY22 results.

Rationale for Valuation – Speculative Buy at GBX 246.50

• Strong Revenue Visibility: The Company has a good visibility of upcoming advisory fees from transactions already announced in its M&A division. Moreover, the Company has a strong pipeline of future business.
• UK GDP: According to the Office for National Statistics, the UK GDP rose by 1.3% during Q4 FY21 when compared with the previous three-month period, stronger than a preliminary estimate of growth.
• Technical Indicator: From a technical standpoint, NUM’s share price is trading between the lower Bollinger band and the middle Bollinger band, reflecting a bullish price momentum.
• Undervalued Multiples: On a forward 12-month basis – EV/Sales, EV/EBITDA, and Price/Earnings valuation multiples of Numis are undervalued against the Investment Banking & Investment Services sector.

Key Risks

• Record UK Inflation: British inflation hit a 30-year high of around 6.2% during February 2022, which may cause a further interest rate hike. Moreover, the ongoing geopolitical tension in Ukraine and Russia can exacerbate inflation concerns and impact the risk appetite of investors.
• Significant Decline in Top-Line Business: The Company’s top-line revenue remained 36% lower during H1 FY22 when compared with its record interim performance a year earlier.

Trading Update (for the six months ended 31 March 2022, as of 1 April 2022)

• Weak Business Performance: The significant reduction in equity capital markets activity across the industry had adversely impacted the investment banking performance during H1 FY22.
• Divisional Performance: The M&A division and its Growth Capital Solutions wing delivered strong revenues during H1 FY22 when compared with an equivalent period of the prior year.

Share Price Chart

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

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Conclusion 

Based on the UK GDP Growth, positive outlook for M&A division, supported by the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Numis Corporation PLC at the current market price of around GBX 246.50 (as of 01 April 2022 at 09:49 AM GMT+1), with lower double-digit upside potential based on 9.43x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Nevertheless, markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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