International Consolidated Airlines Group SA

International Consolidated Airlines Group SA (LON: IAG) is an FTSE-100 listed airline Company, having a significant presence at Heathrow, Gatwick, and London Airport.

Investment Highlights - International Consolidated Airlines Group SA – Avoid at GBX 200.40

• Due to the high uncertainty, the Company has reported significantly higher operating losses and significantly lower capacity for FY2020.
• As per valuation metrics, EV/EBITDA, Price/Book Value and Price/Cash Flow multiples of the International Consolidated Airlines Group SA are currently higher as compared to the corresponding multiples of the Passenger Transportation Services industry, reflecting overstretched valuations.
• In the last week, the Company delivered a negative return of 10.98% and delivered lower returns compared to the benchmark Index (FTSE-100 Index).
• From the technical standpoint, shares were trading below the short-term support level of 20-day (GBX 205.38) simple moving average prices, which reflects a downtrend in the stock.

Key Risks

• The aviation industry is adversely impacted by Covid-19 pandemic due to travel restrictions imposed by the government.
• The weak economic and political environment can hamper the business and could be an obstacle for business growth.

Recent News

On 18 March 2021, International Consolidated Airlines Group SA announced the issue of senior unsecured bonds in 2 series. The total aggregate principal amount shall be about EUR 1,000,000,000.

Financial Highlights – FY2020 (31 December 2020) (released on 26 February 2021)

(Source: Annual Report, Company Website)

• For the financial year 2020, due to significantly lower passenger revenue for the period, the total revenue declined by 69.4% on statutory basis and 69.2% on adjusted basis.
• Due to lower revenue and lower capacity, the profitability for the period declined significantly.
• In Q4 FY2020, the Company secured an additional funding of €3.4 billion, and reduced its capex by €2.3 billion.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

The Company has shown a significant decline in financial performance in the first half of the financial year 2020. Due to the impact of the covid-19 pandemic, the Company reported an operating loss and capacity was significantly declined by 66.5% versus FY2019 data. While demand continues to be adversely affected by quarantine requirements and volatile government restrictions. IAG will not be providing profitable guidance for financial year 2021. IAG expects passenger demand will not come to normal pre-covid-19 levels until 2023. The stock made a 52-week low and high of GBX 86.54 and GBX 239.38, respectively.

Based on the weak future prospects mentioned above and increased levels of uncertainties, we have given an “Avoid” recommendation on International Consolidated Airlines Group SA at the current price of GBX 200.40 (as on 22 March 2021, before the market close at 9:40 AM), while we look forward on analysing the stock, and update when the market dynamics become favourable.

Futura Medical Plc

Futura Medical Plc (LON: FUM) is an AIM-listed innovative R&D Company in the pharmaceutical sector, which develops a portfolio of products based on the proprietary, transdermal DermaSys® technology.

Investment Highlights - Futura Medical Plc – Expensive at GBX 81.00

• The Company has not reported the revenue in the period, which raises uncertainty regarding its earning potential.
• The operating landscape remains highly volatile with the continuing uncertainty due to the Covid-19 pandemic.
• As per valuation metrics, the Price/Book Value multiple of the Futura Medical Plc is currently higher as compared to the corresponding multiple of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 94 level), which means the stock price could decline in the short term.

Key Risks

• The Company operates in a highly regulated landscape, and failure to comply could lead to a significant financial or reputational loss.
• Also, the overdependence on technology can lead to loss of data and significant service interruptions.

Recent News

On 19 March 2021, Futura Medical announced the receipt of Recommendation for Approval from EU notified body for MED3000. MED3000 is classified as Class 2B approved medical device and will become first treatment for ED (erectile dysfunction) across Europe without the need of a prescription from doctor.

Financial Highlights – H1 FY2020 (30 June 2020) (released on 16 September 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2020, the Company is not generating any revenue and reported a decline in operating expenses.
• The profitability for the period has improved, while the Company reported a loss of £1,061,929 in H1 FY2020.
• The cash balance as on 30 June 2020 declined to £2.62 million (30 June 2019: £5.63 million).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an increase in financial performance in the first half of the financial year 2020. The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities, while profitability remained in the negative zone. Futura Medical may face emerging headwinds and cost pressures in future. Further, the near-term economic outlook stays unclear. Moreover, the Covid-19 pandemic continued to create operational challenges while the global uncertainty remained over the supply chain distribution. The stock made a 52-week low and high of GBX 7.75 and GBX 84.00, respectively.

Based on the factors as highlighted above, we believe the stock of Futura Medical Plc is looking “Expensive” at the current price of GBX 81.00 (as on 22 March 2021, before the market close at 8:26 AM GMT), with support from few catalysts needs to be evaluated at a later stage such as positive regulatory process with FDA.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

*Dividend Yield may vary as per the stock price movement.

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