Premier Foods PLC

Premier Foods PLC (LON: PFD) is a FTSE 250 index listed food business that employs over 4,000 people.

Investment Rationale – SELL at GBX 117.70

• Profit Booking: PFD’s stock price has surged over 11.64% in the past five days, which is giving a profit booking opportunity.
• Acquisition Risk: The acquisition of ‘The Spice Tailor’ is funded through a combination of cash and available committed facilities. Therefore, if it doesn’t result in to be earnings accretive, it can impact the business efficiency.
• Financial Decline: On a statutory basis in FY21, PFD reported around 5% and 28% YoY decline in revenue and basis eps, respectively.
• Macroeconomic Uncertainties: Soaring energy prices, squeezing consumer disposable income, interest rate hike, geopolitical tension, economic recession, and monetary policy tightening can continue to put equity market under pressure.
• Technical Standpoint: The current market price has breached the upper Bollinger band, while 14-day RSI (~63.53) is confirming the overbought scenario. Therefore, price can face retracement from this level in the short-term.

One Year Share Price Chart  

 (Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E) (Illustrative)

Conclusion

Based on the decent notional gains, macroeconomic challenges, coupled with the unfavorable valuation conducted above, a "SELL" recommendation on Premier Foods PLC has been given at the current market price of GBX 117.70 (as of 25 July 2022, at 10:15 AM GMT+1). 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 25 July 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

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.’

Note 6: Dividend Yield may vary as per the stock price movement.

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