RWS Holdings PLC

RWS Holdings PLC (LON: RWS) is an FTSE AIM UK 50 Index listed company that is engaged in providing technology-driven language, content management, and intellectual property services.

Investment Rationale for Valuation – Speculative Buy at GBX 351.80

• Appointment of CFO: On 8 April 2022, the company has appointed Rod Day as its interim Chief Financial Officer.
• Acquisition: The Group has acquired Liones Holding B.V. for an initial consideration of €17.5 million. The transaction is expected to strengthen the firm’s position in the structured content market.
• Strategic Steps: The Group is focused to drive organic growth through exposure to higher growth markets that also comprise of technology, life sciences, and other adjacent markets. The firm will also look to grow inorganically through acquisitions.
• Technical Indicator: The stock is hovering near the lower and middle Bollinger band with a low 14-day RSI level of ~30.53.  

Key Risks

• Geopolitical Risks: The Group has exposure to operations in Ukraine and Russia and becomes a key risk in the backdrop of war in Ukraine by Russia.    
• Synergy Risk: The company is also prone to the risk of synergy achievement from the acquired businesses.   

Recent News

Trading Update: On 23 February 2022, the Group has provided a trading update for FY22 and has stated that initial trading has been in line with market expectations. The company has been focussing on scale expansion and drive sustainable organic growth through an effective costing approach.

Financial Highlights (for the year ended 30 September 2021, as of 14 December 2021)

(Source: Company Website)

• Robust Growth in Revenue: The Group reported revenue growth of 95% to £694.5 million in FY21, compared to £355.8 million in FY20.
• Net Cash Position: The company reported a net cash position of £45.3 million during FY21 end, compared to a net debt position of £15.1 million at FY20 end.    

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E)

Conclusion

The Group plans for increased investment in the near term to drive operational efficiency and margin performance over the medium term. It anticipates its PBT margin to remain steady through FY 2022-2024.  

The stock made a 52-week high and low of GBX 700.00 and GBX 326.00, respectively.

Based on the strategic initiatives, impressive performance in FY21, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on RWS Holdings PLC at the closing market price of GBX 351.80 (as of 20 April 2022) with lower double-digit upside potential based on 15.31x Price/NTM Earnings (approx.) on FY23E earning per share (approx.).

Please note 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.

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.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.