Victoria Plc

Victoria Plc (LON: VCP) is a Worcestershire, United Kingdom-headquartered leading designer, manufacturer and distributor of innovative flooring products, including carpets, ceramic and porcelain tiles, flooring accessories, artificial grass and LVT (luxury vinyl tile).

The Company will release full-year results on 3 October 2020.

Investment Highlights – Victoria Plc – Speculative Buy at GBX 321.00

• As per valuation metrics, EV/EBITDA and Price/Cash Flow multiples of the Victoria Plc are currently lower as compared to the corresponding multiples of the Household Goods It reflects, shares are undervalued as compared to the industry.
• In the last three months and six months, the Company delivered a substantial return of 37.50% and 22.22%, respectively, and delivered significantly higher returns compared to the benchmark Index (FTSE-AIM Index).
• The Company has a current ratio of 1.88x in FY2020, reflecting sufficient current assets to pay short-term obligations and a robust liquidity profile to tackle the uncertainty due to covid-19 outbreak. The liquidity position is continuously increasing since FY2017.
• From the technical standpoint, 14-day RSI is currently close to an oversold zone (around 38 level), which means there is a good potential for a short term rebound in the stock price.

Key Risks

• The Company operates in multiple geographies, and its profits can be impacted negatively due to foreign exchange rate fluctuations.
• The Company faces pressure on pricing and margins due to the mature and highly competitive markets where it operates, and material adverse changes in certain raw material prices could affect the profitability as well. 

AGM Statement (released on 10 September 2020)

• The Company has experienced resilient trading after July 2020 as the demand in all principal markets has recovered.
• Following the lockdown, the board expects customers will increase spending on refreshing and improving homes.
• Despite the resilient performance, the Company remained cautious in managing cash flow and expenses to maintain a strong balance sheet based on the current economic scenario.

One Year Share Price Chart

Daily Chart as of 10 September 2020, before the market close (Source: Refinitiv, Thomson Reuters)

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

Conclusion

The trading performance since July 2020 has been resilient with improved demand in all the markets. The Company expects demand to further improve post lockdown with improvement in customer spending. Moreover, the business is able to respond quickly to changes in demand as it has low fixed cost base, and manufacturing facilities are well-invested and highly efficient, allowing the Company to vary production levels as appropriate, in order to maintain a low level of operational gearing. The stock made a 52-week low and high of GBX 136.16 and GBX 492.55, respectively.

Based on the decent prospects and supported by valuation as done using the above method, we have given a “SPECULATIVE BUY” recommendation on Victoria at the current price of GBX 321.00 (as on 10 September 2020, before the market close at 1:33 PM GMT+1) with lower double-digit upside potential based on 32.50x Price/NTM Earnings multiple (approx.) on FY21E earnings per share (approx.).

Camellia Plc

Camellia Plc (LON: CAM) is a United Kingdom-based international food producer company. The principal activities of its associated undertakings and subsidiary comprise of Engineering, Agriculture, Food Service and Investments.

Investment Highlights - Camellia Plc – Speculative Buy at GBX 6,700

• As per valuation metrics, EV/Sales, EV/EBITDA and Price/Cash Flow multiples of the Camellia Plc are currently lower as compared to the corresponding multiples of the Food & Tobacco It reflects, shares are undervalued as compared to the industry.
• The Company has a current ratio of 2.82 in FY2020, reflecting sufficient current assets to pay short-term obligations and a robust liquidity profile to tackle the uncertainty due to covid-19 outbreak. The liquidity position is continuously increasing since FY2015 and is ahead of industry median of 1.68x.
• From the technical standpoint, 14-day RSI is currently close to an oversold zone (around 27 level), which means there is a good potential for a short term rebound in the stock price.

Key Risks

• The Company experiences disturbances in the supply chain due to covid-19 pandemic.
• To meet the new regulations, the Company needs to implement new processes, failing to do so would increase the compliance risk.

Recent News

On 17 August 2020, Camellia announced sales of Horizon Farm property along with a crop of almonds and pistachios for $31 million of gross cash consideration to Maricopa Orchards LLC. CAM holds 80% interest in citrus fruits, almonds and pistachios in Horizon Farms, and will receive around £17.5 million.

Update on Trading Performance (released on 10 June 2020)

• The Company has shown a decent performance from agriculture business in India with improved tea prices and in Kenya production improved, but tea prices declined.
• The tea production stood lower than expectations in Bangladesh region and prices improved but were below last year’s data.
• The Hass avocado crop’s volume increased, while the prices in Europe declined and is expected to improve as the season progresses.
• The Company expect the first full harvest of the Blueberry crop in Kenya in 2021.
• The macadamia production declined in FY2020, due to dry, hot weather in South Africa and Malawi in Q4 FY2019.
• The Company’s remaining agricultural businesses are performing well, and non-agriculture businesses continue to trade well.
• The Company has a strong balance sheet with a cash balance of £73.3 million as on 31 May 2020.

One Year Share Price Chart

Daily Chart as of 10 September 2020, before the market close (Source: Refinitiv, Thomson Reuters)

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

Conclusion

The Company witnessed an improvement in trading performance from the Indian region, with increased production and improvement in tea prices. The tea prices improved in Bangladesh but remained lower than last year’s data. In Kenya, the production of tea increased while prices declined. Other agriculture businesses and non-agriculture businesses performed well for the period.

The Company has a strong balance sheet with decent liquidity position, which further improved by the sale of Horizon Farm property. The Company expect the first full harvest of the Blueberry crop in Kenya in 2021, which will improve profitability further. At present, the Company is not able to provide any guidance for FY2020. The stock made a 52-week low and high of GBX 6,250.00 and GBX 9,900.00, respectively.

Based on the decent prospects and supported by valuation as done using the above method, we have given a “SPECULATIVE BUY” recommendation on Camellia at the current price of GBX 6,700.00 (as on 10 September 2020, before the market close at 11:47 AM GMT+1) with lower double-digit upside potential based on 28.40x Price/NTM Earnings multiple (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.

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