Fevertree Drinks Plc

Fevertree Drinks Plc (LON: FEVR) is a London- Headquartered beverages Company. The Company divided its business on a geographic basis, which includes the United Kingdom, Europe, United States of America and Rest of the World.

Investment Highlights - Fevertree Drinks Plc – Hold at GBX 2,434.00

• Although the financial performance in H1 FY2020 was impacted due to covid-19 pandemic, the Company delivered strong performance from its US business.
• In the last one year, the Company delivered a substantial return of ~ 31.67% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, EV/Sales multiple of the Fevertree Drinks Plc is currently lower as compared to the corresponding multiples of the Beverages industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, shares were trading well above the support level of 20-day simple moving average prices (2,246.00), which reflects an uptrend in the stock and can move up further.

Key Risks

• A change in consumption patterns or a significant deterioration in the UK economy could lead to a fall in demand for the Company’s products.
• The Company operates in highly competitive markets, which could adversely affect the Company’s results.

Financial Highlights – H1 FY2020 (30 June 2020) (released on 8 September 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2020, the Company has a resilient revenue performance, while revenue declined by 11%.
• The Company’s profitability remained impacted due to covid-19 crisis and increased marketing investment.
• The Company has a decent financial position with improved net cash, reflecting support from an asset-light business model.
• The interim dividend increased by 4% for the period, reflecting strong cash generation, confidence in the business and financial strength.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown a decline in financial performance in the first half of the financial year 2020. The profitability remains impacted by the covid-19 crisis, while revenue from US business improved for the period. The performance in the Off-Trade for the period remained very encouraging, and sales across regions exceed the management’s expectations. FEVR has increased penetration in the UK, with value share gain in Australia, Canada, Europe and the US. The Company has made a solid start to H2 FY2020, while the market remains uncertain. The stock made a 52-week low and high of GBX 888.40 and GBX 2,587.00, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance for Fevertree Drinks Plc at the current price of GBX 2,434.00 (as on 18 November 2020, before the market close at 8:55 AM GMT) and will recommend fresh buying at the right time.

Stock Spirits Group Plc

Stock Spirits Group Plc (LON: STCK) is a producer of spirits and liqueurs. The Company’s segments are differentiated into four divisions: Poland, Czech Republic, Italy, and Others.

The Company will release full-year results on 2 December 2020.

Investment Highlights - Stock Spirits Group Plc – Hold at GBX 230.00

• The Company witnessed an improvement in overall trading for FY2020, as both Polish and Czech businesses achieved volume and value growth.
• In the last one year, the Company delivered a decent return of ~ 18.16% and delivered higher returns compared to the benchmark Index (FTSE-All share Index).
• As per valuation metrics, EV/Sales, Price/Cash flow and Price/Book Value multiples of the Stock Spirits Group Plc are currently lower as compared to the corresponding multiples of the Beverages industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, shares were trading well above the support level of 20-day simple moving average prices (224.50), which reflects an uptrend in the stock and can move up further.

Key Risks

• Acquisitions to match rapid transformation may increase integration risk and expected synergies may not be achieved.
• Any change in the regulations and government policies could affect the overall business of the Company.

Trading Update for FY2020 (30 September 2020) (released on 14 October 2020).

• Driven by strong Off-Trade performance for the period, the overall trading stood ahead of expectations.
• Despite the impact of the covid-19 crisis, the Polish and Czech businesses shown growth in value and volume.
• The Company’s cash flow from operations remained strong, which resulted in lower net debt of around €23 million as on 30 September 2020 (30 September 2019: €55 million).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

In the financial year 2020, the Company’s overall trading performance remained good and ahead of expectations, driven by strong Off-Trade performance. The Company witnessed an increase in value and volume from Czech and Polish businesses. Driven by a solid performance from the flavoured vodka portfolio, the Polish business outpaced the total vodka market. The Czech business witnessed growth in retail value sales ahead of other competitors in the market. Both the acquired companies, Bartida and Distillerie Franciacorta, delivered positive contribution. The Polish government’s decision to apply additional tax from 1 January 2021 on small format pack sizes, will impact the performance, while STCK has taken series of operational and commercial actions to mitigate the possible impact. The stock made a 52-week low and high of GBX 119.80 and GBX 263.50, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance for Stock Spirits Group Plc at the current price of GBX 230.00 (as on 18 November 2020, before the market close at 8:00 AM GMT) and will recommend fresh buying at the right time.

*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.