4imprint’s consistent approach of investing in marketing to grow its revenue base continues to produce results well in excess of the market growth. FY19 results are as indicated in January’s update, with the top line up 17%, from new and returning customers. 4imprint is the largest distributor of promotional products in the US, yet its market share is under 4%. The key unknown for FY20 is the coronavirus, although the supply chain is well stocked. Our revenue and earnings forecasts are broadly unchanged. There is potential for expansion of 4imprint’s valuation multiples once current global health uncertainties are resolved.

Management reports that the first two months of the new financial year have traded well, with the revenue trajectory firmly on track to meet the target of over $1bn by FY22. Our forecast for FY20 is close to this level at $950m, with $1,040m modeled for FY21e, implying the target will be reached a year ahead of plan.

This all carries the proviso that the coronavirus situation does not significantly worsen. In the short term, there is no cause for concern on the trading front. 4imprint has close relationships with its domestic suppliers and back up through the supply chain.

The timing of the onset of the virus outbreak, just ahead of Chinese New Year, meant North American stockists had built up their inventory to cover the normal hiatus. Many of the Far Eastern suppliers are now resuming manufacturing and management is reasonably relaxed that supply issues should be manageable. Should the outbreak take hold in the US, however, this could lead to lower demand as the economy is hit and businesses reduce their own marketing spend and presence at trade shows. It is far too early to make any quantitative judgments on the potential impact.