Edison issues outlook on Findel (FDL)

London, UK, 21 June 2016

Edison issues outlook on Findel (FDL)

Several valuation metrics and our sum-of-the-parts analysis suggest that the market undervalues Findel's potential. To close the valuation gap, management simply needs to continue on its current path. The increasingly online retailer Express Gifts has resumed growth. Turning around Education will take time in a difficult market, but existing initiatives should see FY18e profits leap. Meanwhile, core net debt remains well controlled and is set to reduce further.

The table above reveals Findel to be a lowly rated share. On our estimates, its PEG ratio falls from 0.45x in FY17e to only 0.26x in FY18e. Its price-to-book ratio falls from 1.3x in FY17e to 1.1x in FY18e. We have reduced our sum-of-the-parts valuation, partly in response to lower earnings estimates for FY17 and FY18, but also to acknowledge that valuation benchmarks are also lower. Our new SOTP valuation of 238p (was 300p) remains far in excess of the prevailing share price.

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