Informa PLC

FTSE 100 listed Informa PLC (LON: INF) is the United Kingdom-based Media Company. It is engaged in events, exhibitions, scholarly publishing, and information services.

On 3 June 2021, INF has scheduled its annual general meeting.

Investment Rationale – Buy at GBX 556.00

• The FBX business integration with Novantas should present additional opportunities for Informa to handle greater client challenges.
• Informa reported over 20% reduction in net debt in FY20 and delivered a cost savings of more than £600 million, while it removed all financial covenants and secured liquidity of over £1 billion. It underpins continued strength and security in the business.
• Over the past four years (FY16 to FY20), revenue and gross profit have surged at a CAGR of nearly 5.40% and 5.06%, respectively.
• From a technical standpoint, 100-day EMA (GBX 548.90) is sustaining below the current market price and supporting the bullish trend.

Risk Assessments

• The Covid-19 pandemic and associated social distancing measures have been leading to the cancellation or postponement of events. Moreover, sales can be impacted by increased supply-chain disruptions and product availability issues.
• Further, economic instability and currency fluctuations can also impact business performance.

Recent News

26 April 2021: Informa unveiled that it is combining its FBX business with Novantas, whereby Novantas will be acquired by Informa and Inflexion (private equity firm) on a cash and debt-free basis with a fair value of US$243 million.

Financial Highlights for the 12 months ended 31 December 2020 (as on 22 April 2021)

 (Source: Company Website)

• Due to the significant pandemic impact on physical events during FY20, revenue plunged 42.5% and adjusted profit before tax fell 79.3% against FY19.
• With debt restructuring and rescheduling, cash flow remained positive during FY20.
• As on 31 December 2020, net debt stood at £2.0 billion (FY19: £2.7 billion), supported by equity addition and positive funds flow.
• During FY20, INF also acquired F1000 Research Limited and TrialScope Inc for cash consideration of £14.9 million and £54.1 million, respectively.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

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

Conclusion 

Informa has entered FY21 with stability and security to create long-term value, supported by improved financing, continued growth subscription led business, and further expansion in B2B digital services. Consequently, Informa expects to remain cash flow positive throughout FY21 and deliver baseline revenues of £1.7 billion. In FY21, Informa is also estimating pre-COVID performance levels and underlying revenue growth of over 4%. The stock made a 52-week High and Low of GBX 659.00 and GBX 345.80, respectively.

Based on enhanced digital capabilities, reduced debt profit, enhanced liquidity, business strength and resilience, supported by the valuation conducted above, we have given a “BUY” recommendation on Informa PLC at the current market price of GBX 556.00 (as on 17 May 2021, at 9:10 AM GMT), with lower double-digit upside potential based 30.98x Price/Earnings (approx.) on FY21E Earnings Per Share (approx.).

Avast PLC

Avast PLC (LON: AVST) is a FTSE 100 quoted Company, which offers digital security and privacy products and serves over 435 million users online.

Key Dates

• On 11 August 2021, Avast expects to release its H1 FY21 results.
• 13 May 2021 is the scheduled ex-dividend date.

Rationale for Valuation – Buy at GBX 443.60

• During Q1 FY21, adjusted EBITDA surged 10.3% against Q1 FY20 and reported an adjusted EBITDA margin of 56.4%, reflecting continued demand for Avast products and solutions.
• Avast has delivered another year of high levels of profitability and cash flow generation in FY20. Avast also expects to deliver FY21 organic revenue growth in the upper-end range of 6-8%.
• The recently completed disposal of Family Safety mobile business should benefit the growth rate in FY21 and likely to be modestly earnings dilutive.
• Over the past four years (FY16 to FY20), revenue and operating income have grown at a CAGR of ~27.24% and ~80.07%, respectively.
• From a technical standpoint, 14-day RSI (39.95) is hovering close to an oversold position and supporting the upside potential.

Key Risks

• Increased operating cost can be anticipated with planned on-premises to cloud migration due to higher wage inflation.
• Increasing competition, uncertain market environment, reduced government funding, cyber-attacks, technological changes, and heavy reliance on large customers can impact the Company’s growth trajectory.

Recent News

21 April 2021: Avast announced a partnership with Recorded Future (enterprise security intelligence provider) to improve real-time threat intelligence reporting capabilities.

First Quarter Trading Update comprising the period from 1 January 2021 to 31 March 2021 (as on 20 April 2021)

(Source: Company result)

• Avast affirmed a good start to FY21 with continued demand for security, privacy, and performance solutions.
• On an organic basis, revenue surged 10.4% to US$237.1 million in Q1 FY21 against Q1 FY20, since consumer business delivered decent growth and SMB business sustained positive momentum.
• In March 2021, Avast renewed its contract for the distribution of its CCleaner utility application and consumer antivirus products.
• The Board has recommended the payment of 11.2 US cents as the final dividend per share, which is scheduled for payment on 18 June 2021.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price/Cash Flow Approach (NTM) (Illustrative) 

Conclusion

The business has traded in line with expectations so far in FY21, supported by customer engagement and monetisation. The Group now expects the upper-end range of 6-8% organic revenue growth in FY21, with adjusted EBITDA margin is likely to remain flat versus FY20. The robust billing performance in FY20 shall support the revenue generation in H1 FY21. Furthermore, the structural growth drivers of the industry shall create opportunities for the business in the long-term, despite the short-term macroeconomic uncertainties. The stock made a 52-week high and low of GBX 604.50 and GBX 418.00, respectively.

Based on the continued demand, improved confidence in the outlook, high levels of profitability and cash flow generation supported by the valuation conducted above, we have given a “BUY” stance on Avast PLC at the current market price of GBX 443.60 (as on 17 May 2021, at 9:00 AM GMT), with lower double-digit upside potential based 17.23x Price/Cash Flow (approx.) on FY21E Cash Flow Per Share (approx.).

*All forecasted figures and Peer/Industry information have been taken from Refinitiv, Thomson Reuters.

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

Disclaimer

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. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

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. 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 does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does 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 intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.