Smiths News (SNWS) Initiation - Predictable cas...

Edison Investment Research Limited Smiths News (SNWS) Initiation - Predictable cash flows and growing dividends 19-Oct-2021 / 07:00 GMT/BST London, UK, 19 October 2021 Smiths News (SNWS) Initiation - Predictable cash flows and growing dividends Smiths News has successfully performed a turnaround of the business that has seen it return to a core newspaper and magazine distribution operation. While the print sector is declining, revenue is predictable and management has a clearly demonstrable cost-saving track record such that cash flow is strong and profits are broadly flat, post COVID-19. This means that debt is being paid down and dividends are likely to become an increasing feature. We value the business at 77p, twice the current price. We value Smiths News at 77.4p/share based on a discounted cash flow (DCF) model, more than twice the current share price. Given the predictable and consistent cash flow of the core business, we believe this is a reasonable methodology to adopt. The value is confirmed by our dividend discount model (DDM) valuation, which suggests a value of 76.6p/share. A DDM approach is also an appropriate way to value the stock considering the current strategy, which is to generate cash, pay down debt and return surplus cash to shareholders via dividends and 'special' payments. In absolute terms, Smiths News trades on a P/E of 4.1x in 2022e, with a yield of 6.2% and the prospect of 'special' dividends to bolster the yield as debt falls. In our experience, when 'safe' dividend yields exceed P/Es in absolute terms, it highlights a value opportunity.  Click here to view the full report or here to sign up to receive research as it is published. All reports published by Edison are available to download free of charge from its website www.edisongroup.com About Edison: Edison is a leading research and investor relations consultancy, connecting listed companies to the widest pool of global investors. By focusing on the volume and quality of investors reached - across institutions, family offices, wealth managers and retail investors - Edison can create and gauge intent to purchase, even in the darkest pools of capital, and then make introductions via non-deal roadshows, events or virtual meetings. Having been the first in-market 17 years ago, Edison now has more than 100 analysts covering every economic sector. Headquartered in London, Edison also has offices in New York, Frankfurt, Amsterdam and Tel Aviv and a presence in Athens, Johannesburg and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison is not an adviser or broker-dealer and does not provide investment advice. Edison's reports are not solicitations to buy or sell any securities. For more information, please contact Edison: Andy Murphy [phone] [e-mail] Anne Margaret Crow [phone] [e-mail] Learn more at www.edisongroup.com and connect with Edison on:  LinkedIn  www.linkedin.com/company/edison-group-/ Twitter   www.twitter.com/Edison_Inv_Res YouTube  www.youtube.com/edisonitv Dissemination of a CORPORATE NEWS, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.

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