JD Sports Fashion Plc

JD Sports Fashion Plc (LON: JD.) is an FTSE 100 listed sports fashion retailer. The Company deals in multi-branded sports fashion and outdoor clothing along with footwear and equipment.

The Company will release Full-year 2021 results on 13 April 2021.

Investment Highlights – JD Sports Fashion Plc – Expensive at GBX 856.00

• Despite the improved performance, the Company expects operations to be materially impacted due to the impact of the covid-19 in FY2022.
• The Company’s debt/equity ratio has significantly increased at the beginning of the financial year 2020 and is higher than the industry median.
• As per valuation metrics, EV/Sales, EV/EBITDA and Price/Cash Flow multiples of the JD Sports Fashion Plc are currently higher as compared to the corresponding multiples of the Speciality Retailers industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 54 level), which means the stock price could decline in the short term.

Key Risks

• The Company’s business is exposed to risks such as compliance risk, fraud, criminal activity and bribery, which could result in reputational damage.
• The Company may experience an increase in operating expenses due to disruptions in the supply chain.

Trading Update ( released on 11 January 2021)

• The Company’s total revenue for 22 week period on like for like basis surged by 5% compared to last year’s performance for the same period.
• The Company witnessed a positive trend in demand during H2 FY2021 and expects headline profit before tax for FY2021 to be around £295 million and ahead of market expectations.
• The Company has scaled up the online platform and is confident of attracting more customers towards its

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown improvement in performance in the second half of the financial year 2021, with increased demand from online channels. The Company expects a strong improvement in financial performance in the financial year 2022. JD expects full-year profit before tax to be ahead of the current year by 5% to 10%. The Company expects covid-19 pandemic to be the material factor to have an impact on operational performance in the financial year 2022. Presently, the Company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of GBX 274.70 and GBX 923.20, respectively.

Based on the factors as highlighted above, we believe the stock of JD Sports Fashion Plc is “Expensive” at the closing price of GBX 856.00 (as on 13 January 2021), with support from few catalysts needs to be evaluated at a later stage such as an improved focus on online business.

Hargreaves Lansdown Plc

Hargreaves Lansdown Plc (LON: HL.) is an Investment and Savings Platform offering services to over 1.3 million clients. It helps the clients in making informed investment decision by providing a tool and information.

Investment Highlights - Hargreaves Lansdown Plc – Avoid at GBX 1,610.50

• The Company’s operations are significantly impacted by the volatility in the economic environment.
• As per valuation metrics, EV/Sales, EV/EBITDA and Price/Book Value multiples of the Hargreaves Lansdown Plc are currently higher as compared to the corresponding multiples of the Investment Banking & Investment Services industry, reflecting overstretched valuations.
• In the last one year, the Company has delivered a negative return of ~ 10.15% and delivered significantly lower returns compared to the benchmark Index (FTSE-100 Index).
• From the technical standpoint, 14-day RSI is supporting downward movement (around 64 level), which means the stock price could decline in the short term.

Key Risks

• The Company has been facing a challenging market conditions from the perspective of governments, investors, competition, and volatile stock markets.
• Moreover, the negative market movements due to the Covid-19 disruption has been impacting the value of assets under administration.

Recent News

On 9 December 2020, Hargreaves Lansdown announced that its Senior Independent Director, Shirley Garrood, had stepped down from the board at the end of 2020.

Update on Trading Performance (released on 8 October 2020)

• In the first quarter of the financial year 2021, the Company made a good start with growth in revenue, assets and clients.
• The Company’s net new business stood at £0.8 billion with 31,000 net new clients for the period.
• Hargreaves Lansdown’s revenue surged by 12% to £143.7 million in Q1 FY2021, and AUA (Assets under administration) increased by 3% to £106.9 billion.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Book Value Approach (NTM) (Illustrative)

Conclusion

The Company has shown a good start of the financial year 2021, with increased revenue, clients and assets. The Company has a resilient client proposition and business model. Despite the resilient business performance, Hargreaves Lansdown operates in volatile market conditions. The Company is confident towards its strategy and is focused on the needs of savers and investors based out of the UK to deliver the highest level of client service. The stock made a 52-week low and high of GBX 1,134.65 and GBX 1,902.29, respectively.

Based on the factors as highlighted above, we have given an “Avoid” stance on Hargreaves Lansdown Plc at the closing price of GBX 1,610.50 (as on 13 January 2021), with support from few catalysts needs to be evaluated at a later stage such benefits from new clients and improved service.

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

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

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.

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. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. 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 do 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 in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.