RY 172.93 -0.271% SHOP 157.86 0.7274% TD 75.22 0.2532% ENB 59.74 0.5216% BN 81.36 0.9429% TRI 234.42 0.5404% CNQ 43.01 1.2% CP 104.55 0.7225% CNR 146.44 0.7568% BMO 139.17 0.2377% BNS 77.04 -0.0649% CSU 4487.8101 0.7917% CM 91.94 -0.6054% MFC 44.04 1.1716% ATD 80.33 -0.5694% NGT 54.77 -0.635% TRP 66.14 0.532% SU 50.335 1.4819% WCN 245.2 -2.104% L 191.84 0.64%
Transcontinental Inc. (TSX: TCL.A) is a Canadian print media company which majorly conducts its business in Canada and the United States. The company primarily operates in three segments, namely packaging, printing, and others. The company’s packaging segment generates revenues from the manufacturing and recycling of flexible plastic and paper products.
Key Updates:
Source: REFINITIV, Analysis by Kalkine Group
Risks associated with the Business:
The company might witness margin pressure due to the increase in input costs like raw materials, labor costs to name a few. Further imposition of restriction on account of rising Covid cases might hinder the demand for packaging products due to supply chain distribution.
Q1 FY22 Financial Highlights:
Q1 FY22 Income Statement Highlights (Source: Company Report)
Top-10 Shareholders: Top ten shareholders of the company together hold approximately 37.47% stake, Jarislowsky Fraser, Ltd. and Caisse de Depot et Placement du Quebec. are the major shareholders in the company with an outstanding position of 11.00% and 4.92%, respectively.
Source: REFINITIV, Analysis by Kalkine Group.
Valuation Methodology (Illustrative): Price to Earnings based
Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendations:
The company reported strong revenue growth across the segments, where packaging segment witnessed year over year growth of 13.9% and printing segment grew 7.7% on a YoY basis. The management expects the momentum to continue in the coming quarters, which would be reflected in the coming quarters. Within the printing segment, the company is implementing control costs strategies to improve its operational profitability.
The stock has been valued the stock using the Price to Earnings-based relative valuation method and has arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Greif Inc, Richards Packaging etc.
Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock of TCL.A at the closing market price of CAD 15.30 on May 20, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
One-Year Technical Price Chart (as on May 20, 2022). Source: REFINITIV, Analysis by Kalkine Group
*Recommendation is valid on May 24, 2022, price as well.
Technical Analysis Summary
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Disclaimer
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