Synthomer Plc – Value Analysis (LONDON:SYNT) : November 13, 2017

Capitalcube gives Synthomer Plc a score of 69.

Our analysis is based on comparing Synthomer Plc with the following peers – Victrex plc, Carclo plc, Itaconix plc and Elementis plc (VCT-GB, CAR-GB, ITX-GB and ELM-GB).

Investment Outlook

Synthomer Plc has a fundamental score of 69 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It currently trades at a Price/Book ratio of (4.53).
  • SYNT-GB‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • SYNT-GB‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, SYNT-GB‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s relatively low gross margin and median pre-tax margin suggest operations may be constrained on pricing versus peers.
  • SYNT-GB‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s capital investment seems appropriate for a business with peer median returns.
  • SYNT-GB has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

SYNT-GB has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 18.23% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 0.34%), and a well-cushioned interest coverage level of 19.37x, SYNT-GB can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 4 chosen peers for the company, only 2 of the stocks have an outstanding debt balance. Companies with no debt include VCT-GB and ITX-GB.

SYNT-GB has maintained its Quick & Able profile from the prior year-end.

  • SYNT-GB‘s interest coverage is similar to last year’s high of 19.84x, which compares to the 2013 low of 6.75x.
  • Though its interest coverage has remained relatively stable at 19.37x compared to 2015, its peer median has decreased to 19.51x from 99.17x during this period.
  • Interest coverage rose 79.18 points relative to peers.
  • SYNT-GB‘s debt-EV has increased 9.66 percentage points from last year’s low and is now above its four-year average debt-EV of 17.27.
  • Though its debt-EV increased to 18.23% from 8.57% (in 2015), its peer median remained relatively stable during this period at 0.34%.
  • Relative to peers, debt-EV rose 9.67 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Victrex plc 0 3.03 No interest exp 999
Carclo plc 39 1.71 15.48 28.47
Itaconix plc 0 6.72 No interest exp 999
Elementis plc 0.34 2.49 19.51 61.41
Synthomer PLC 18.23 1.36 19.37 43.79
Peer Median 0.34 2.49 19.51 61.41
Best In Class 0.34 6.72 No interest exp 999

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Company Profile

Synthomer Plc develops, markets and sells polymer products derived from petrochemical monomers. Its products cover the industries including coatings, building products, gloves, carpets, paper, adhesives, plastics and PVC. The company was founded on June 16, 1908 and is headquartered in Harlow, the United Kingdom.


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