J Sainsbury PLC - Sustainable Business Model with More Than 90,000 Products Available for Customers

J Sainsbury Plc (LON: SBRY) is a British chain of supermarkets. The group is involved in grocery-related retailing and retail banking with interests in property as well.

On 1^st July 2020, the Company will release its First Quarter Trading Statement 2020-21.

Recent News
On 14^th May 2020, the Group has launched its bike delivery service for the first time in stores outside of London. It is progressing out Chop Chop to fifty stores across twenty UK cities.

On 12^th May 2020,the Company announced the appointment of Keith Weed and Tanuj Kapilashrami as a Non-Executive Directors, which will effective from 1^st July 2020.

Financial Highlights - Reflecting Good Progress on Financial Services and Strong Customer Response

(Source: Presentation, Company Website)

On 30th April 2020, SBRY announced the full year 2020 results for the 52 weeks to 7 March 2020 along with the update on the impact of Covid-19 over the business. Group and Retail sales both reduced by 0.1 per cent (including VAT, including fuel) year-on-year. As per the sales in the FY20, Groceries Online sales increased by 7.6 per cent, Supermarket sales declined by 0.1 per cent, and Convenience sales increased by 1.3 per cent. The total profit before tax rose by 26 per cent to GBP 255 million as compared with the previous year (FY19: GBP 202 million), driven by the improved grocery sales during the year. The Group witnessed a robust retail free cash flow of GBP 611 million in FY20. The Group has deferred any dividend payments decisions until later in the financial year, when there is a better understanding of the financial impact of Covid-19 disruption.

Share Price Performance
 
(Source: Refinitiv, Thomson Reuters) - 1-Year Chart as at May-19-20, before the market close
 
On 19^th May 2020, before the market close (at 8:25 AM GMT+1), J Sainsbury PLC’s shares were trading at GBX 187.10 and were down by 0.37 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 236.70/GBX 171.19.

Valuation Methodology


Valuation Metrics

(Source: LSE)

As on 30^th April 2020, the Price/Earnings, EV/EBITDA and Price/Book multiples of the SBRY were 21.8x, 3.9x and 0.5x, respectively and the same multiples were lower as compared with the Food & Drug Retailers industry. It is reflecting that the company is trading at a lower multiple as compared to its peers.

Growth Catalysts
The Company witnessed healthy momentum across all the business. Led by the investment in over 450 supermarkets and 362 convenience stores, the Group is consistently improving the customer service scores.

Conclusion
In the current period, the Group delivered a decent performance against its strategic priorities. The Group has been facing high demand for grocery since the start of March 2020. In the Retail market segment, the consumer outlook stays uncertain. As per the recent trend of COVID-19 restrictions, SBRY is progressively pushing the business to the online marketplace from retail shops. In the current crisis, the food producer companies are performing well, due to continuous food supply as essential. The Company is also expecting single-digit percentage growth in grocery sales through the lockdown period.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Buy” recommendation at the current price of GBX 185.60 (as on 19th May 2020, before the market close at 9:13 AM GMT+1) with lower double-digit upside potential based on 11.16x NTM Price/Earnings (approx.) on FY21E earnings per share (approx.).

Hastings Group Holdings PLC – Strong Business Model with Good Progress on Strategic Initiatives

Hastings Group Holdings Plc (LON: HSTG) is a Bexhill, United Kingdom-based agile, data and digitally focused general insurance company.

On 5^th August 2020, the Company will release its half-year 2020 Results.
Recent News
On 13^th May 2020, the Company announced that it has mutually agreed to waive and terminate each other's respective rights and obligations under a Relationship Agreement entered at the time of the Company's IPO in October 2015. This includes Broad Street Principal Investments International Ltd and certain other affiliates of The Goldman Sachs Group Inc. who hold shares in the Company.

Trading Update – Reflecting Good Progress in the Underlying Business Performance
On 15^th April 2020, the Group provides an update on its trading performance for the three months ended 31 March 2020, with Gross written premiums stable at £234.3 million and live customer policies (LCP) increased by 4% year on year to 2.87 million. For the three months ended 31^st March 2020, the net revenue slightly declined to £179.2 million, with reduced investment income and policy growth being more than offset by lower earned premiums. The Company witnessed continued progress on its other strategic initiatives, with increased digital adoption and improved online functionality. Including the delivery of benefits from the Group’s technology and strategic initiatives, the underlying business performance remains in line with management’s expectations. HSTG remains strong in capital position, cash generation and liquidity. The Board still intends, at this stage, to seek shareholder approval for the final dividend per share of 5.5 pence at the AGM (Annual General Meeting) on 21 May 2020; this represents a decrease of 39 per cent on the 2018 final dividend.

Share Price Performance
 
(Source: Refinitiv, Thomson Reuters) 1-Year Chart as at May-19-20, before the market closed
 
On 19^th May 2020, before the market close (at 8:27 AM GMT+1), Hastings Group Holdings PLC’s shares were trading at GBX 170.3 and were up by 1.13 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 207.40/GBX 136.50.
 
Valuation Methodology


Growth Trajectory Holds Upside Potential
The company is operating at an excellent position to profit from the customers’ push towards online sources, especially through price comparison websites to buy insurance. The Company’s investment in future business would help in achieving further sales growth and operational efficiencies.

Conclusion
During 2019, the Company continued to make progress on the operational, technology, and strategic initiatives. Itsunderlying performance in Q1 FY20 was in line as expected. The company and sector are facing challenging times amid ongoing uncertainty; however, the group has minimised any interruption for clients, supported by the digital investments platform, with even more clients now using the online services and mobile app. 

Based on the decent growth prospects and the valuation done using the above method, we have given a “Buy” recommendation at the current price of GBX 165.60 (as on 19^th May 2020, before the market close, 9:01 AM GMT+1) with high single digit upside potential based on 1.75x NTM Price/Book Value (approx.) on FY20E book value per share (approx.).
 
*All forecasted figures and Peers information has been taken from Refinitiv, Thomson Reuters.

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