GlobalData PLC

GlobalData PLC (LON: DATA) is a FTSE AIM 100 quoted Company, which provides market data intelligence services. It has been serving over 4,000 clients, including Companies across various industries, financial institutions, government organizations and professional service firms.

Rationale for Valuation – SPECULATIVE BUY at GBX 1,340.00

• Positive Update on FY21 Performance: For FY21, the Board expects around 8% like-for-like organic revenue growth with adjusted EBITDA margin of ~34% (FY20: 32%).
• Acquisition Benefits: The strategic progress made through M&A (acquisitions of the Life Sciences business of IHS Markit, LMCA Holdings Limited and LMCI Holdings Limited) in the Q4 FY21 shall augment the solid organic growth.
• Better Profitability: Over the last two interim results, GlobalData has maintained significantly higher profitability margins, as EBITDA margin and net margin remained higher than the industry median of 19.6% and 7.4%, respectively.
• Technical Indicator: From a technical standpoint, 14-day RSI (~42.93) is in the oversold territory, while the stock price is hovering close to the lower standard deviation of the Bollinger Band.

Key Risks

• Macroeconomic Uncertainties: The risk appetite of investors can remain dented ahead of the Central Bank policy decision due this week.
• Pandemic Induced Restrictions: Due to the resurgence of the pandemic, travel restrictions can have an impact on new business and pipeline opportunities.
  

Financial Highlights for the six months ended 30 June 2021 (as on 26 July 2021)

 (Source: Company Website)

• Revenue and Operational Growth: During H1 FY21, underlying revenue and adjusted EBITDA surged 8% and 17% year-on-year, respectively. The growth was supported by the solid growth in subscription revenue.
• Profit Growth: The profit before tax increased to £16.0 million in H1 FY21 (H1 FY20: £9.3 million), reflecting a 72% year-on-year increase.
• Strong Cash Conversion: The cash from operations remained flat at £40.8 million in H1 FY21, represented 133% of Adjusted EBITDA.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative)

 Conclusion 

During FY21, the Company delivered a strong financial performance as the Company maintained its business as usual throughout the year. Moreover, the attractiveness of the information services has given them the potential of delivering strong financial and operating performance going forward. The introduction of single Platform operating model is likely to accelerate organic and inorganic growth opportunities. The recent acquisition of Life Sciences business of IHS Markit Ltd shall strengthen pharmaceuticals data, insights, and analytics services. The stock made a 52-week High and Low of GBX 1,700.00 and GBX 1,150.00, respectively.

Based on the strong trading, revenue guidance, accelerated growth strategy, and favourable valuation conducted above, we have given a “SPECULATIVE BUY” stance on GlobalData PLC at the closing price of GBX 1,340.00 (as on 31 January 2022), with lower double-digit upside potential based on 52.01x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Polar Capital Holdings PLC

Polar Capital Holdings PLC (LON: POLR) is a FTSE AIM UK 50 Index listed investment management Company. It provides investors a range of geographical and sector investment opportunities.

Rationale for Valuation – SPECULATIVE BUY at GBX 629.00

• Strong Platform for Growth: POLR has reported strong net inflows in FY22 across its range of fund strategies. Moreover, the pipeline of flows has remained robust, while 88% of its AuM having outperformed their respective benchmarks since inception.
• Solid AuM Update: On 13 January 2022, POLR reported that it had £24.3 billion of assets under management (AuM) as on 31 December 2021, reflecting a 16% jump since end of March 2021. It reflected the combination of market uplift, strong net inflows, and outperformance.

• Technical Indicator: From a technical standpoint, 14-day RSI (~24.39) is in the oversold zone, while the stock price is close to the lower Bollinger Band.
• Undervalued Multiples: On forward 12-month basis, key valuation multiples (EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow, and Price/Book) are quite lower than the median of the Financials sector.

Key Risks

• Federal Reserve Meeting: The latest Federal Reserve Meeting indicated an interest rate hike by March 2022. Thus, it may cause a significant decline in Global Equities.
• Macroeconomic Uncertainty: The ongoing economic instability, potential tightening of monetary policy, subdued consumer confidence, and currency fluctuations can also impact business performance.

H1 FY22 Financial & Operational Highlights (for six months ended 30 September 2021, as of 22 November 2021)

 (Source: Company Website)

• Decent Growth in AuM: POLR had shown an increase of £2.5 billion in AuM from £20.9 billion at the end of FY21 to £23.4 billion for H1 FY22, an increase of approximately 12% over the period.
• Robust Profitability: The core operating profit jumped by around 65% to £36.3 million during H1 FY22.
• Balance Sheet: POLR remained well capitalised and debt-free, with net assets of more than £98 million and £67 million of own free cash on the balance sheet.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

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

Conclusion 

POLR has a progressive dividend policy and declared an interim dividend of 14.00 pence per share. Following its strong performance in FY21, it has witnessed a solid momentum into the first two weeks of January 2022, on the back of diverse range of complementary funds. The stock made a 52-week High and Low of GBX 951.00 and GBX 610.00, respectively. 

Based on the active asset management, AuM growth, diversification strategy, decent dividends, and favourable valuation conducted above, we have given a “SPECULATIVE BUY” stance on Polar Capital Holdings PLC at the closing price of GBX 629.00 (as on 31 January 2022), with lower double-digit upside potential based on 12.49x Price/NTM Earnings (approx.) on FY22E Earnings per share (approx.).

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. 

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.

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