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(Source: Refinitiv, Thomson Reuters) 

Ashtead Group Plc – Increased Annual Dividend with Decent Fundamental Growth Story

Ashtead Group Plc (LON: AHT) is an FTSE 100 listed global equipment rental business with national networks in the United Kingdom, Canada, and the United States.

Financial Highlights – Q4 and Financial Year 2020

(Source: Quarterly Report, Company Website)

On 16th June 2020, the Company provided the audited results for the year ended 30 April 2020, with another strong year capped by the impact of the COVID-19. Group revenue for FY20 surged by 12 per cent (9 per cent at constant exchange rates) to GBP 5,054 million (2019: GBP 4,500 million) with good growth in Canadian and the US markets. Whilst the rental revenue increased by 8 per cent year-on-year to GBP 4,606 million from GBP 4,138 million. For the year to the end of April, the firm recorded a 7 per cent drop in statutory profit before tax to GBP 983 million from GBP 1,059 million the year before. On an underlying basis, the earnings per share stood at 175 pence in FY20 and remained the same against the previous year. The Group said it had invested GBP 1.5 billion in capital expenditure and GBP 453 million on bolts-on acquisition. During the year, the Company generated free cash flow of GBP 792 million (2019: GBP 368 million). Ashtead declared a final dividend per share of 33.5 pence, bringing the total dividend per share of 40.65 pence.

Share Price Performance

Daily Chart as of July 1^st, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Ashtead Group Plc shares were trading at GBX 2,713.00 at the time of writing before the market close (at 9:43 AM GMT+1) on 1^st July 2020 and down by 0.22% versus the previous day closing price. Stock 52 week High and Low were GBX 2,879.00and GBX 1,010.00, respectively.

From the technical standpoint, shares were trading well above the short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Valuation Methodology
 

Key Risks
In the future, environmental regulations, foreign exchange risks and expansion by competitors could affect the business operations. 

Conclusion
Despite the market turmoil caused by COVID-19, the Group surged its total dividend per share for FY2020, as it expressed confidence in the forte of its balance sheet. Looking forward, the Company anticipates its capital expenditure to be approximately GBP 500 million for FY21. Ashtead Plc witnessed good progress in market development through recent acquisitions. The management continues to look to the medium term with confidence and strengthening the market position and a year of strong free cash flow.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the current price of GBX 2,713 (as on 1^st July 2020, before the market close at 9:43 AM GMT+1) and will recommend fresh buying at the right time.

AB Dynamics Plc - Leading Specialist in Automotive Test Systems Globally

AB Dynamics Plc (LON: ABDP) provides the testing systems to the global motor industry. The Company designs products for automobile companies and the global automotive research and development sector.

Board Changes
On 10^th June 2020, AB Dynamics announced that Chief Technology Officer, Matthew Hubbard has resigned from his position for personal reasons effective immediately.

Financial Highlights - Robust Financial and Operational Performance in H1 FY2020

(Source: Interim Report, Company Website)
 
For the first half of 2020, the company’s revenue increased by 34% to £34.7 million (H1 FY19: £25.8 million), driven by good performance across both operating sectors. The revenue from Track testing increased by 29%, due to ADAS test platform sales and track testing services, while Laboratory testing & simulation surged by 82%, due to robust contribution from newly acquired rFpro in addition to new product sales. Led by the higher gross margin, the adjusted operating margin surged by 24.8% in H1 FY20 against the same period last year. The statutory profit after tax for H1 FY20 stood at £3.1 million, a decrease of 45% from the corresponding period of the last year. Adjusted diluted earnings per share increased by 10% to 31.2 pence in H1 FY20 (H1 FY19: 28.3 pence), while basic earnings per share declined by 52% to 13.7 pence. The drop-through was lower than the increase in adjusted operating profit due to the improved tax rate. The Company has delivered a strong debt-free balance sheet, with significant net cash of £35.1 million, providing resources to withstand the likely impact of the Coronavirus pandemic and to support the ABDP's investment requirements.

Share Price Performance

Daily Chart as of July 1^st, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

AB Dynamics Plc shares were trading at GBX 1,630.00 at the time of writing before the market close (at 9:44 AM GMT+1) on 1^st July 2020 and down by 0.31% versus the previous day closing price. Stock 52 week High and Low were GBX 2,850.00and GBX 855.00, respectively.

From the technical standpoint, 14-day RSI is currently in an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Valuation Methodology
 

Key Risks
The market conditions in which the company operates is full of challenges and might impact the operational and financial performance. The ongoing outbreak of Coronavirus could impact the company’s performance in the near term.

Conclusion
The Company has delivered strong revenue growth, driven by acquisitions, international expansion and increased service/support, with the growth of 11% in underlying revenue. The strong first-half performance shows the early benefit of the revised strategy, and the acquisitions are performing well. In the second half of 2020, the group remains uncertain due to the COVID-19 pandemic, with the withdrawal of guidance and suspension of interim dividend. Future growth prospects stay supported by long-term structural and regulatory growth drivers in active safety and autonomous systems.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the current price of GBX 1,630 (as on 1^st July 2020, before the market close at 9:44 AM GMT+1) and will recommend fresh buying at the right time.
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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