Bloomsbury Publishing PLC

Bloomsbury Publishing PLC (LON: BMY) is a FTSE All-Share listed multinational publisher of fiction and non-fiction content. The Company was established in the year 1986, and today it has offices in multiple countries.

Investment Rationale – SELL at GBX 395.00

• Target Price Hit: BMY has topped our previously recommended target price, and already set its new 52-week high last week. It can face retracement from this level amid rising inflationary pressure. Moreover, the stock has yielded a return of around 53% in the past year, giving a lucrative opportunity to book profit.
• Macroeconomic Turbulence: The Federal Reserve meeting could indicate the winding down of monetary stimulus and could prompt caution in the equity market.
• Overvalued Multiples: On a forward 12-month basis – key valuation multiples (EV/EBITDA, Price/Earnings, and Price/Cash Flow) are overvalued against the median of Media & Publishing industry.
• Technical Indicator: From a technical standpoint, the momentum oscillator, 14-day RSI (~70.89) indicates an overbought signal, while the stock price is hovering close to the upper Bollinger Band.

Risk Assessments

• Macroeconomic Risks: The inflationary market conditions, supply chain snags and rising input prices can also impact its operating costs and customer buying power.
• Operational Difficulties: The market has got disrupted with the resurgence in Covid-19 cases since it has affected the bookshop chain in most of the UK and North American market.

Financial Highlights (for the six months ended 31 August 2021, as on 27 October 2021)

 (Source: Company Website)

• Financial Growth: BMY demonstrated excellent performance in H1 FY22 and delivered 29% and 225% year-on-year growth in revenue and profit, respectively.
• Divisional Growth: Both divisions (Consumer and Non-Consumer) reported an increase in revenue and profits.
• Acquisition: BMY completed two acquisitions in H1 FY21, reflecting a key step for long-term growth strategy.
• Dividend: The Board recommended a 5% increase in interim dividend to 1.34 pence per share in H1 FY21.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

Conclusion

Bloomsbury has already given a remarkable growth in its share prices on the back of strong financial and operational growth. The upside potential is sceptical from the current level, while it has already retraced post setting its new 52-week high last week. The widespread supply chain issues and inflationary pressure can impact the profitability margins further, while the Company’s cash conversion has already taken a hit in H1 FY22. Therefore, it is prudent to book profit at the current levels and reinvest capital plus gains when the external environment is more supportive. The stock made a 52-week High and Low of GBX 405.00 and GBX 240.00, respectively.

Based on the exceptional price gains, overvalued multiples, overbought price scenario, market uncertainties, and unfavourable valuation conducted above, we have given a “SELL” stance on Bloomsbury Publishing PLC at the current market price of GBX 395.00 (as on 3 November 2021, at 8:10 AM GMT).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from Refinitiv.

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

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