Fulcrum Utility Services Limited (LSE: FCRM)

Fulcrum Utility Services Limited is a FTSE AIM All-Share index listed specialist gas infrastructure provider. It offers maintenance for electrical systems and renewable energy generating infrastructure.

Investment Rationale – SELL at GBX 6.80

• Profit Booking: FCRM’s stock price has soared over 39% on 9 September 2022. Therefore, it is presenting a profit booking opportunity.
• Losses Worsened: In FY22, Loss before tax expanded to £14.2 million (FY21: £11.5 million), due to wider market issues of supply chain pressure and cost inflation. Moreover, the Board didn’t recommend any dividend considering the continuing turbulence in the Group's core markets.
• Lower Margin than Industry: In FY22, gross margin of FCRM was 18.9%, while the industry median is 70.8%.
• Macroeconomic Uncertainties: The market sentiments can remain weak in the short-term due to a 40-year high of 10.1%, subdued factory output, geopolitical tensions, and political risks. BoE has also given warning for recession this year.
• Technical Indicator: The momentum oscillator 14-day RSI (~84.79) is reflecting an overbought scenario; thus, price can face retracement in the short-term.

Share Price Chart  

(Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY23E) (Illustrative)

Conclusion

Based on the notional gains, macroeconomic challenges, coupled with the unfavorable valuation conducted above, a "SELL" recommendation on Fulcrum Utility Services Limited has been given at the current market price of GBX 6.80 (as of 9 September 2022, at 8:35 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 9 September 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.’

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