Network International Holdings Plc

Network International Holdings Plc (LON: NETW) is a provider of a full suite of technology-enabled payments solutions with operation centres in the UAE, Egypt, Jordan, South Africa and Nigeria.

The group will release its Q1 Trading Update on 30^th April 2020.

Business Update
On 2^nd April 2020, Network International Holdings released an update on the business performance and financing. The group has a decent balance sheet for the financial year 2019, and the group has refinanced its syndicated lending facility of USD 525 million, which consists of 16 regional and global banks. The group will use its facility for mid to long term corporate use and to fund growth projects. The group is continuously monitoring the impact of COVID-19 and is taking measures to ensure the health and safety of its employees and customers. The group has enabled access for its employees to work from home and ensure the smooth running of business operations. The company is committed to supporting its customers and offered help to SMEs in all possible ways. Due to the lockdown imposed by the UK government,  the Merchant Acquiring volumes have been impacted for the period. The group expect its Issuer Solutions business to be robust and fixed revenue will act as a cushion against the lower volumes. The group is taking multiple steps to reduce cost and preserve cash and deferred its dividend payment until the situation stabilises.

Share Price Performance

Daily Chart as of April14^th, 2020, after the market close (Source: Thomson Reuters)

Network International Holdings Plc shares closed at GBX 440.00 at the time of writing after the market close on 14^th April 2020. Stock's 52 weeks High is GBX 656.00 and Low is GBX 317.00.

Valuation Methodology

*Peers: Aveva Group Plc, Keywords Studios Plc, Sage Group Plc and Avast Plc.

*Currency exchange rate taken for 1 USD = 0.79413 GBP.

Key Risks
The company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.

Conclusion
The group has reported strong growth across its operational indicators; the digital payments industry is highly competitive, which can hinder future growth. The use of its services could decline, reducing its revenue and profitability, if the company cannot provide new services to its clients and keep pace with rapid developments and change in its industry, along with the threat that it may experience software defects, undetected errors and development delays. While the company remains confident that it will perform in-line with the guidance, the current market volatility and geopolitical environment can severely affect business operations and might have a negative impact on the stock performance.The Covid-19 has resulted in increased volatility and reduced liquidity, which has impacted the company’s share price.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 440 (as on 14^th April 2020), while we look for any upcoming catalysts in the near term.

Amigo Holdings Plc

Amigo Holdings Plc (LON: AMGO) is a consumer finance group and is one of the largest providers of guarantor loan in the UK, which, through its subsidiaries, provides sales financing services.

The group will announce its full-year results in May 2020.

Covid-19 Trading Update
On 24th March 2020, Amigo Holdings Plc released an update for trading and impact of Covid-19. To tackle the outbreak, the company has decided to pause activities related to new lending expect exceptional circumstances. The freed employees from lending activities will be shifted to other teams to increase the capacity and serve existing customers well. As per the advisory released by the UK government, many employees are working remotely from homes.

Financial Highlights – Nine Months Financial Year 2020 (31 December 2019, GBP, million)
In the nine months of the financial year 2020, the company’s revenue grew by 8.5 per cent to GBP 218 million as compared to GBP 201 million in the nine months of the fiscal year 2019. The number of customers increased by 18 per cent to GBP 232.1 thousand in nine months FY2020. Adjusted profit after tax declined 37.9 per cent to GBP 44.7 million in nine months FY2020 against GBP 72.0 million in nine months FY2019.

Share Price Performance

Daily Chart as of April14^th, 2020, after the market close (Source: Thomson Reuters)

Amigo Holdings Plc shares closed at GBX 19.00 at the time of writing after the market close on 14^th April 2020. Stock's 52 weeks High is GBX 297.50 and Low is GBX 10.48.

Conclusion
In the nine months of the fiscal year 2020, the company has shown a growth in revenue and number of customers. The group has not been able to control its operating and non-operating expenses for the period. It operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The company's controlling shareholder’s willingness to sell its holding has resulted in the launch of a formal sale process and strategic review. The company’s operations are impacted negatively due to uncertainty created by the Brexit as it will result in an uncertain political and economic climate for short to medium term. The company has recently launched new operations in the new markets, which will increase regulatory risks and foreign exchange risks.

Therefore, based on the above rationale, we have given an “Avoid” recommendation at the closing price of GBX 19.00 (as on 14^th April 2020).

*All forecasted figures and peers have been taken from Thomson Reuters.

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