William Hill PLC

William Hill PLC (LON: WMH) is a London, United Kingdom-based company, engaged in gaming and betting business. The company is differentiated into three business, namely online, William Hill US, and retail.

On 15^th May 2020, the company will release its trading statement.

Recent News
On 2^nd April 2020, the group has announced the appointment of Matt Ashley to the position of Group’s Chief Financial Officer (CFO) and appointed William Hill as an Executive Director, with effect from 6th April 2020. The group has also announced the appointment of Stephen Parry, as a Chief Operating Officer (COO).

On 16^th March 2020, the company announced that all recent developments to postpone or cancel sporting events and close US casino, in the wake of the ongoing uncertainty created by COVID-19. Led by this impact, the group’s EBITDA is expected to reduce by £100 million to £110 million, with an additional month of closure impacts EBITDA by £25 million to £30 million. Also, dividend suspension has been declared until further notice.

Financial Performance (for the 52 weeks ended 31 December 2019, £million)

(Source: Annual Report, Company Website)

In the 52 weeks ended 31st December 2019 (the period), the group’s net revenue reduced by 2% to £1,581.7 million.Adjusted operating profit from existing operations for the period reduced by 37% to £147 million. Operating cash flow for the period tumbled 7% to £183 million. The acquisition of Mr Green and persistent investment in capital expenditure and the expanding US business has led to a surge in net debt to £535.7 million against the £308.1 million in the prior period.

Share Price Performance

Daily Chart as of April7^th, 2020, after the market close (Source: Thomson Reuters)

On April 07, 2020, William Hill PLC shares closed at GBX 90, up by 12.64% against the previous day closing price. Stock's 52 weeks High and Low are GBX 206.80/GBX 28.63.

Valuation Methodology


Key Risks
Changing regulations in the online business, specifically, the impact of a potential introduction of a maximum stake on online slot machines in the UK; the impact of the ban on the use of credit cards to gamble in the UK from April 2020 being significantly worse than currently forecast; and a change in international tax laws and regulations. Failure to compete effectively in Retail, Online or the US market. The impact of Brexit on financial performance as well as in the supply chain. Due to COVID-19, they postpone or cancel sporting events and close US casino will reduce the upcoming revenue and profit.

Conclusion
The group has made decent progress on several fronts, including the US business, Retail business, and Online business. Both the top-line and the Bottom-line performance have declined, while the dividend per share declined for the period.

As the company operates in multiple geographies, its profits can be impacted negatively due to foreign exchange rate fluctuations. In the future, environmental regulations, foreign exchange risks and expansion by competitors could affect its business operations. The company’s operations can be affected negatively due to uncertainties created over the Brexit, as it would disturb the business.
Based on the headwinds faced by the group and uncertainties in near-term due to Covid-19 pandemic, we have given a "WATCH" recommendation at the closing price of GBX 90 (as on 7th April 2020), while we look for any upcoming catalysts in the near term.

Mitchells & Butlers PLC

Birmingham, United Kingdom-based Mitchells & Butlers PLC (LON: MAB) is an operator of managed pubs and restaurants.  It offers a broad choice of drinking and eating-out experiences with its established brands (All Bar One, Toby Carvery, Harvester and Browns).

The company will release its half-year results in May 2020.

Coronavirus (COVID-19) Trading Update (as on 18^th March 2020)
The company has provided a trading update in respect of the unprecedented COVID-19 situation, which is presently having a material impact across the sector. The group like-for-like sales were 0.9% in the first 24 weeks ended 14 March 2020. The government has taken measured to shut down the pubs and restaurants, which reflects that the company would face downturn pressure in sales.  However, the business anticipates a substantial reduction in the expected outturn for 2020 and unable to provide detailed guidance currently. The company has suspended its capital programme and slashing cost across the business. 

Q1 Trading Update (as on 9^th January 2020)
The company announced the trading update for the 14 weeks ended 4^th January 2020. Over the core three-week festive period, the group is on-track, with the growth of 5.6% in like-for-like sales, including decent performances on all the key festive days. In respect of 7 weeks to 4 January 2020, the like-for-like growth of 3.5%, with particularly decent food sales growth.  Total sales have surged by 2.7% over the full year to date (4^th January 2020).

Share Price Performance

Daily Chart as of April7^th, 2020, after the market close (Source: Thomson Reuters)

On April 07, 2020, Mitchells & Butlers PLC shares closed at GBX 200.50, up by 10.65% against the previous day closing price. Stock's 52 weeks High and Low are GBX 483.00/GBX 92.30.

Conclusion
The company’s like-for-like sales increased by 3.5% in the first quarter of 2020. The UK economic and political environment stays uncertain. From the perspective of employment, the unemployment levels are at a 40-year low, any restriction on the free movement of labour would be anticipated to have a material effect on the cost of labour. The group’s performance was negatively impacted by the outbreak of COVID-19.

Currently, the stock is trading near the 52-week mid, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level. In the future, environmental regulations, foreign exchange risks and expansion by competitors could affect its business operations.

Based on the above rationale, we have given a "WATCH" recommendation at the closing price of GBX 200.50 (as on 7^th April 2020), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures and information have been taken from Thomson Reuters.

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