Bunzl Plc

Bunzl Plc (LON: BNZL) is an FTSE 100 listed international distribution Company providing customised solutions to B2B customers.

The Company will release Q1 FY2021 trading update on 21 April 2021.

Investment Highlights – Bunzl Plc – Buy at GBX 2,145.00

• The Company has delivered strong financial performance in the financial year 2020, and expects to delivered higher revenue growth in FY2021, which will be futher supported by active pipeline of acquisitions.
• In the last one year, the Company delivered a substantial return of ~16.79 and delivered higher returns compared to the benchmark Index (FTSE-100 Index).
• As per valuation metrics, EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow and Price/Book Value multiples of the Bunzl Plc are currently lower as compared to the corresponding multiples of the Diversified Industrial Goods Wholesale industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is in the oversold zone and is supporting an upside move (around 21 level), which means the stock price could increase in the short term.

Key Risks

• The organic growth can be impacted if it fails to respond to the competitive pressure successfully.
• The Company may fail to integrate new acquisitions, which will impact financial and operational performance.

Recent News

On 1 March 2021, Bunzl announced the acquisition of Deliver Net in the UK in January, Netherlands based Disposable Discounter in February and Canada based Pinnacle in February.

Financial Highlights – FY2020 (31 December 2020) (released on 1 March 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, the Company has delivered strong revenue growth of 9.4% on constant exchange rate, along with 20.9% increase in adjusted operating profit and 26.6% increase in adjusted EPS, on constant exchange rates.
• The Company has a strong cash conversion of 103% with 1.5x times net debt to EBITDA and substantial headroom for growth.
• The Company delivered 7% increase in the final dividend in FY2020 and maintained consecutive dividend per share growth for 28 years.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown an increase in financial performance in the financial year 2020, on both reported and constant exchange rates. Both the top-line and the bottom-line performnace improved, with higher profitability margins. The Company expects to deliver strong revenue growth in the financial year 2021, which will be further benefitted by the recent acquisitions. Bunzl has delivered strong organic growth since 2004, and has an extensive supply chains and Asia sourcing and auditing operation, which helped in offset the impact of restrictions. The stock made a 52-week low and high of GBX 1,242.00 and GBX 2,710.00, respectively.

Based on the factors discussed above, we have given a “Buy” recommendation on Bunzl Plc at the current price of GBX 2,145.00 (as on 1 March 2021, before the market close at 8:30 AM GMT) with lower double-digit upside potential based on 17.88x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Hill & Smith Holdings Plc

Hill & Smith Holdings Plc (LON: HILS) is an industrial engineering company supplying and manufacturing of galvanising services and infrastructure products.

The Company will release full-year 2020 results on 10 March 2021.

Investment Highlights - Hill & Smith Holdings Plc – Buy at GBX 1,280.65

• The Company has a robust balance sheet and a strong reputation, with good visibility of future earnings from the order book and pipelines.
• In the last six months, the Company delivered a decent return of ~5.92 and delivered higher returns compared to the benchmark Index (FTSE-250 Index).
• As per valuation metrics, EV/Sales multiple of the Hill & Smith Holdings Plc is currently lower as compared to the corresponding multiple of the Metals & Mining industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is supporting an upside move (around 44 level), which means the stock price could increase in the short term.

Key Risks

• The recent outbreak of COVID-19 may have a significant and prolonged impact on global economic conditions.
• The Company works on complex and potentially hazardous projects, which require continuous monitoring of health and safety risks.

Trading Update for 4 Months period ending 31 October 2020 (released on 12 November 2020)

• The Company has shown an encouraging recovery during the period, with revenue of £235.2 million, improved margins, and tight cost control across the Group's three divisions.
• The Company witnessed strong liquidity position and robust balance sheet, with net debt of £158.1 million and £219.1 million of headroom as on 31 October 2020.
• Moreover, the performance of the Road & Security business stood in line with expectations during the four months trading period.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown decent performance in the four-month period ending 31 October 2020. The Company has demonstrated flexibility, commitment, and resilience and is in a good position to emerge stronger in the future. HILS expects operating profit for FY2020 to be in between £61.6 million and £64.7 million. Based on the assumption that if the markets remain open, the Board expects operating profit for FY2020 will exceed the top end of the forecasted range. The Company highlighted that the medium-term outlook would be challenging due to the uncertainty in the market conditions following the pandemic, while operations will be benefited by the Government schemes. The stock made a 52-week low and high of GBX 844.00 and GBX 1,486.00, respectively.

Based on the factors discussed above, we have given a “Buy” recommendation on Hill & Smith Holdings Plc at the current price of GBX 1,280.65 (as on 1 March 2021, before the market close at 12:05 PM GMT) with lower double-digit upside potential based on 25.30x Price/NTM Earnings (approx.) on FY20E earnings Per Share (approx.).

*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.