Let’s be honest — it does look good when you’re trading “shares under ten” and you’ve got Rolls-Royce in your portfolio. Despite the prestigious name, this stock fully qualifies as a true penny stock. Shares Under Ten is adding 2,000 shares to the portfolio at the current price of around 97 pence. 5-Year Share Price Performance – Rolls-Royce Holdings plc. Company Profile The Rolls-Royce brand is, of course, best known for its luxury cars — but many may not realise that the automotive business has long been owned by BMW. Rolls-Royce Holdings plc, founded in 1884 and headquartered in London, operates independently and focuses on engineering and power systems. The company is structured into four divisions: Civil Aerospace, Power Systems, Defence, and New Markets. The Civil Aerospace division designs, manufactures, and services engines for large commercial aircraft, regional jets, and business aviation. The Power Systems division develops and sells integrated power and propulsion solutions for marine, defence, and selected industrial sectors. The Defence division supplies engines for military transport aircraft, patrol aircraft, and naval propulsion. The New Markets division focuses on small modular reactors (SMRs) and new electric energy solutions, as well as maintenance, repair, and overhaul (MRO) services. The New Markets division is expected to play a key role in the global energy transition. Rolls-Royce is working to accelerate the launch of a new generation of mini nuclear reactors, a development fast-tracked by the ongoing energy crisis. While these SMRs aren’t expected to be operational before the early 2030s, management is eager to speed up the process, especially as Western nations seek to reduce dependence on Russian fossil fuels following the invasion of Ukraine.   However, engineers within the company have expressed frustration with the slow pace of regulatory approval in the UK, arguing that the government’s process for reviewing reactor safety is unnecessarily burdensome. Rolls-Royce aims to build SMRs that generate around 470 megawatts of power — just one-seventh the output of a large-scale nuclear plant, but at roughly one-twelfth the cost. The UK government has stated that the company’s technology is entirely new and must therefore undergo thorough scrutiny. Rolls-Royce engineers, however, point out that the technology is based on decades of experience in nuclear-powered submarines, a proven and extensively tested field.   Rolls-Royce cannot be acquired without government approval. The UK government holds a so-called “golden share,” which grants it special veto rights. This share does not offer profit participation or capital rights, but allows government representatives to attend general meetings and block specific strategic moves — such as takeover bids — that could affect national interests. Financials The UK’s most well-known engineering firm was hit hard by the COVID-19 pandemic, as airlines pay Rolls-Royce based on the number of flight hours logged by its engines. Given these extraordinary circumstances, FY2020 and FY2021 are not considered reliable indicators of the company’s underlying performance. In 2021, Rolls-Royce reported £414 million in underlying operating profit, a sharp turnaround from a loss the previous year. Growth in the Power Systems and Defence divisions contributed significantly to this financial improvement. However, the company also reported a free cash outflow of £1.5 billion from continuing operations in the same year. CEO Warren East commented on the results: “We have improved our financial performance, met our short-term commitments, secured new business, and made important strategic progress during the year. While challenges remain, we are increasingly confident about the future and the significant commercial opportunities presented by the energy transition.” Rolls-Royce’s credit profile has improved since the onset of the pandemic, and its exposure to the Russia-Ukraine conflict remains limited. As a result, Moody’s upgraded the company’s outlook from negative to stable. Pros Strong visibility and predictability of earnings Stable margins in the Defence division New CEO Warren East is aiming to bring fresh momentum to the company Cons Loss of market share in the business jet segment Disappointing cash flow development High R&D costs for new engine programmes Conclusion We are not particularly enthusiastic about this stock. While management certainly shows no lack of ambition, those good intentions have yet to translate into improved results. The company appears to be spread too thin across too many markets — and it’s simply not possible to be best-in-class everywhere. A more focused approach would likely serve Rolls-Royce well. Divesting non-core activities and doubling down on key strengths could strengthen both performance and investor confidence. The business jet division, for example, already faced structural challenges before the energy crisis, and its outlook remains weak. A sale of this unit might be a sensible move — especially if a solid price can still be secured. Back in August 2021, management announced it was open to selling assets such as ITP Aero, the turbine blade manufacturer, in an effort to raise at least £2 billion. Strategic asset sales like these may be necessary to unlock value and refocus the company. Third-Party Analyst Ratings for Rolls-Royce.   Globally, twenty analysts currently cover Rolls-Royce Holdings, and the consensus view is that the stock could gain around 28% over the next 12 to 18 months. At Shares Under Ten, we believe the share price has likely found a bottom, and we’re taking this opportunity to add the stock to our portfolio. Naturally, we’ll be monitoring developments closely. A takeover seems highly unlikely under current circumstances. Rolls-Royce plays a vital role in the UK defence sector, and the government holds a golden share that gives it veto power over any unwanted acquisition. In addition, ceding control over Rolls-Royce’s expertise in modular nuclear reactors would run counter to the UK’s long-term energy policy. Former Prime Minister Boris Johnson has been a strong advocate for nuclear energy and clearly sees the company’s know-how as a strategic national asset — especially amid the current energy crisis.Takeover rumours have surfaced before. Rolls-Royce was the subject of M&A speculation both in 2015 and again in 2020. However, following a series of profit warnings in 2015, the stock price fell by around 75%, and its recovery

This is a chance we simply can’t ignore. We’re looking at a company with a market cap of around €2.5 billion, while one of its divisions is about to be sold for a stunning €2.3 billion in cash. That means investors are set to receive a substantial portion of their investment back through a special dividend. And the best part? The company’s profitable growth engine – its B2B division – remains entirely under Playtech’s control. What’s left is a healthy, cash-rich tech company with a strong foothold in regulated gambling markets and plenty of room for further growth. Figure 1. Playtech share price performance over the past five years. Source: Google. Founding Playtech was founded in 1999 in Estonia by Israeli entrepreneur Teddy Sagi. Together with a team of software developers, multimedia experts, and professionals from the casino industry, he developed a comprehensive software platform for online gambling. From the outset, the company focused on B2B services, providing technology to online casinos, poker rooms, bingo sites, and sports betting platforms. Although Playtech was established in Estonia, it had an international outlook from the beginning and quickly expanded throughout Europe. The decision to go public in the UK was strategic: London offered an attractive platform for high-growth tech companies, including international ones. In 2006, Playtech went public, raising approximately £312 million with a valuation of around £550 million. The proceeds were used to fund international expansion, acquisitions, and continued product development. In 2007, Mor Weizer was appointed CEO—a role he continues to hold to this day. Under his leadership, Playtech has grown into one of the world’s leading gambling software providers. Business Activities Today, Playtech is a major global technology supplier to the gambling industry, offering a wide range of products and services. The company provides software solutions for both online and land-based casinos, sports betting, poker, bingo, lotteries, and live casino games. A key component of its offering is the IMS platform (Information Management Solution), which allows clients to manage all player data, payments, marketing, and game content from a single system. Playtech also operates dedicated live casino studios and develops its own slot machines and table games. Sports betting technology is offered through its subsidiary, Playtech BGT Sports. In addition to its B2B services, Playtech also operates B2C activities. Through its subsidiary Snaitech, the company offers gambling services directly to consumers in Italy, both online and in physical outlets. Sale of Snaitech In September 2024, Playtech announced the sale of its entire stake in Snaitech to Flutter Entertainment for €2.3 billion in cash. Snaitech is Playtech’s B2C arm, active in Italy in both online gambling and retail sports betting. The deal is expected to close in the second quarter of 2025. The sale aligns with Playtech’s strategy to fully focus on its fast-growing and highly profitable B2B operations. By divesting Snaitech—which is more capital-intensive and less scalable—the company sharpens its focus on technology and platform services for regulated gambling markets worldwide. Caliplay Agreement Also in September 2024, Playtech announced a new strategic agreement with Caliplay, its joint venture with Caliente in Mexico. The collaboration is being restructured, giving Playtech a 30.8% stake in a new U.S.-based holding company called Cali Interactive, which will focus on the rapidly growing regulated gambling market in the United States. The agreement ends a years-long legal dispute over contract terms and outstanding payments. For Playtech, the deal means direct revenues from Caliplay service fees will cease, but it gains the prospect of dividend income from Cali Interactive and a strategic position to participate in U.S. market growth. 2024 Results On March 27 (pre-market), Playtech reported its full-year 2024 results. The B2C division—mainly consisting of Snaitech—saw only 2% revenue growth. Margins were around 24.5%, lower than in B2B, and future growth is limited due to market saturation and increased regulation. The B2C model is also capital-intensive, requiring investment in retail outlets, marketing, and absorbing the risk of sports results. While Snaitech remains profitable, it offers limited scalability and few international expansion opportunities. In contrast, the B2B division performed strongly. In 2024, B2B revenue rose by 10%, and EBITDA grew by 22%, with the margin increasing to 29.4%. Growth was driven primarily by North and South America, including a doubling of revenue in the U.S. Client concentration also improved: the top five customers accounted for 42% of revenue in 2024, down from 51% a year earlier—making the revenue base more stable and less reliant on a handful of large clients. Looking ahead, management expects adjusted EBITDA of €250 to €300 million from 2025 onwards, with annual free cash flow of €70 to €100 million. These figures reflect only the remaining B2B operations, as Snaitech is being sold and Caliplay is now a minority holding. Growth in Online Casinos Both Europe and the United States are experiencing strong growth in the online gambling market, creating attractive opportunities for Playtech. According to a recent report by the EGBA and H2 Gambling Capital, Europe’s gambling market reached a gross gaming revenue of €123.4 billion in 2024, up 5% from 2023. Online gambling was the main driver, increasing by roughly 12% to €47.9 billion. Online now represents 39% of the total gambling revenue in Europe. This growth has been fueled in part by the legalization and regulation of online gambling in countries such as Germany and the Netherlands, where online casinos are gaining popularity and taking market share from land-based venues. The U.S. online gambling market also continues to expand rapidly, according to the State of the States 2024 report by the American Gaming Association. In 2023, the U.S. gambling market posted record revenue of $66.6 billion, a 10% year-on-year increase. While traditional casinos still account for the largest share—around $49.4 billion—it is the new formats like online sports betting and online casinos that are growing fastest. Online casino games generated $6.17 billion in revenue, a 28% increase from the previous year, driven by continued legalization and regulation at the state level. Strategy Figure 2. Playtech’s global B2B strategy.

Last year, SharesUnderTen scored big with this stock. We issued a Buy recommendation when the price was between €5 and €6. The stock rallied almost immediately, hitting our price target of €13 before the year was out. We exited a bit earlier, but investors who held on locked in gains of over 135% in just six months. Since then, the price has pulled back to below €8. But despite the drop, the recently released annual results were anything but disappointing. While revenue came in slightly below expectations, profitability beat estimates. More importantly, management shared a positive outlook for 2025. Cautiously optimistic in a choppy market, we’re adding 150 shares back into our SharesUnderTen portfolio. Not a bold bet—just a smart, calculated move with solid upside potential. HelloFresh share price performance over the past twelve months. Company Profile Founded in 2011, HelloFresh is one of the standout success stories to emerge from startup incubator Rocket Internet. The company went public in 2017 at €10.25 per share. Rocket Internet gradually reduced its stake after the IPO and fully exited in 2019, selling its remaining shares at around €8 each. In hindsight, not the best timing—since the stock went on a massive rally, peaking near €100 in 2021. Since then, however, the share price has dropped sharply as revenue growth has stalled (see Table 1). That’s not entirely surprising: with an estimated 50% market share, HelloFresh is running up against the natural limits of its core business. That’s not necessarily a bad thing—as long as profitability can be improved. And that’s exactly where management is now focused, launching several cost-cutting initiatives to boost margins. HelloFresh operates two divisions: Meal Kits and Ready-to-Eat. The Meal Kits division includes the original business: the well-known boxes with fresh ingredients that customers cook themselves. The Ready-to-Eat division is a newer and rapidly growing segment: pre-prepared meal solutions that require no cooking. Ready-to-Eat is currently growing at a rapid pace and already accounts for more than a quarter of total revenue. The expectation now is that the decline in the Meal Kits segment will stabilize, while the Ready-to-Eat segment continues to expand. In short: HelloFresh still has plenty of room for growth—just from a different direction than before.   Table 1: Results over the past 4 years. *Adjusted for one-off items   Outlook At the release of its annual results on 11 March, management announced that, thanks to ongoing cost-saving measures, normalized operating profit is expected to rise by over 65% in 2025, reaching €225 million. Normalized EBITDA is projected to come in at €475 million. However, the company also noted that a number of one-off expenses will be incurred due to restructuring efforts and investments aimed at improving operational efficiency. Table 2: Balance Sheet as of December 2024. *Including goodwill. **Including lease liabilities. Table 2 shows that intangible assets are valued at €0.4 billion. This implies that roughly €0.5 billion of tangible book value remains within equity, or €2.96 per share. Total debt amounts to €0.9 billion, while cash and cash equivalents stand at €0.5 billion. This results in a net debt position of €0.4 billion. Based on normalized 2024 EBITDA, the net debt/EBITDA ratio is just 1.1x. This means HelloFresh is far from its maximum borrowing capacity and can easily raise additional liquidity if needed. CEO Increases His Stake In September, it was announced that co-founder and CEO Dominik Richter privately purchased 1.5 million shares for a total of approximately €10 million. As a result, his ownership stake increased from 4.2% to 5.0%. We view this as a very strong signal—the ultimate insider showing confidence by making a personal, high-conviction investment of this scale. Share Buyback Program Throughout 2024, HelloFresh repurchased approximately 10.3 million shares under its share buyback program, at an average price of €8.00. Although the program was originally set to expire in December, it has been extended, with an additional €75 million allocated for further repurchases in 2025. At the current share price, this allows for the repurchase of 9 to 10 million shares, representing more than 5% of total shares outstanding. Given the depressed share price, we believe this is a highly effective use of capital. Valuation Forecast As shown in Table 3, based on 2027 estimates, HelloFresh is trading at a price/earnings ratio of 8.0x and an EV/FCF multiple of 7.8x. Table 3: Estimates through 2027   Conclusion: Worth Buying The valuation metrics just mentioned are suspiciously low for a market leader. That said, we’re confident there are no skeletons in the closet—after all, the CEO personally bought €10 million worth of shares last September. The only plausible explanation for the current discount is modest profitability. However, HelloFresh is in a unique position to benefit from economies of scale, and it seems only a matter of time before it outcompetes its rivals and significantly boosts its bottom line. We’re issuing a Buy recommendation. As a preliminary price target, we once again set €13 per share—and even at that level, we believe the stock remains undervalued. The author holds a long position in HelloFresh. Auteur heeft op moment van schrijven een positie in HelloFresh. Major Shareholders Active Ownership Corp SARL: 7.7% Dominik Richter (CEO): 5.0% Key Data Name: HelloFresh Ticker: HFG Sector: Food – Retail Exchange: IBIS (Germany) ISIN: DE000A161408 52-week low: €4.42 52-week high: €13.92 Share price: €7.78 Shares outstanding: 162 million Market capitalization: €1.3 billion Cash position: €0.5 billion Total debt: €0.9 billion Net debt: €0.4 billion Enterprise value (EV): €1.7 billion EV/revenue: 0.23x Tangible book value per share: €2.96 Price/tangible book: 2.7x Dividend per share: €0.00 Website: ir.hellofreshgroup.com