Cello Health Plc (CLL)

Cello Health Plc is a leading healthcare advisory company. The company provides advisory services to clinical and commercial clients and also have a digital delivery capability. The company is currently servicing top pharmaceutical clients worldwide and are also associated with biotech, diagnostics and other non-healthcare clients. The company has nearly 1,000 high skilled professionals. Cello Health plc operates through its offices which are located in the UK, US and Asia. The outstanding market capitalisation was around £128.27 million and a dividend yield of 3.14 per cent.
 
Recent Development
On 21^st March Cello Health Plc opens an entity in the Berlin. The step has been taken by the group after considering the risk of Brexit on its client and employee relationships.

Financial Results and Review – Financial Year 2018 (£, Thousand)

(Source: Annual Report, Company Website)

In the Financial year 2018, the company reported revenue of £165,573 thousand in the financial year ending December 2018 against £170,293 thousand for the previous year of the same period. The net revenue for FY2018 stood at £104,816 thousand as compared to £102,485 thousand in FY2017. There was an increase of 2.27 per cent in net revenue due to a decrease in the Third-party project costs in the current financial year. The operating profit for FY2018 stood at £8,758 thousand as compared to £6,176 thousand in FY2017. There was a significant increase of 41.81 per cent due to a strong divisional performance by cello health and cello signal. The profit before tax for FY2018 stood at £8,419 thousand as compared to £5,817 thousand in FY2017. There was an increase of 44.73 per cent due to a decrease in finance costs in the current financial year. The profit for the year stood at £6,618 thousand in FY2018 against £4,228 thousand in FY2017. The basis earning per share stood at 6.27 pence in FY2018 as compared to 4.09 pence in FY2017. The diluted earning per share stood at 6.14 pence in FY2018 against 4.03 pence in FY2017.

Share Price Performance

Daily Chart as at Mar-22-19, before the market close(Source: Thomson Reuters)

On 22nd March 2019, at the time of writing (before market close, GMT 10:31 AM), Cello Health Plc shares were trading at GBX 122.50, same as its previous day closing price. Stock's 52 weeks High and Low is GBX 141.00/GBX 95.00.
 
Valuation Methodology
 

Conclusion
The company had shown good financial growth as compared with the previous year. There had been strong growth in the overseas business of the company. Recently the company has opened new offices in Berlin and Philadelphia. Majority of the company’s revenue is from overseas due to which company is impacted by prevailing economic conditions. Economic and geopolitical uncertainty has been increased with the uncertainty over Brexit. Based on the strong growth prospects of the company and the valuation done using the above method, we have given a Speculative BUY recommendation at the closing price of GBX 122.50 (as on 21st March 2019) with single-digit upside potential based on 9.1x NTM Enterprise value to EBITDA (approx.) on FY19E EBITDA.
 

Ted Baker Plc (TED)

Ted Baker Plc offers menswear, womenswear and accessories under its brand. The brand is known for its original fashion offering with high-quality design detailing and unique use of pattern and colour. The company split its business into three segments being Retail, wholesale and Licensing. The outstanding market capitalisation was around £737.08 million and a dividend yield of 3.54 per cent.
 
Recent Development
Ted Baker has posted its first drop in annual profit since the recession. The profit before tax of the company was down by 26 per cent to £50.9 million. Ted Baker informed last month about the foreign exchange hit on their operations. There was a decline in share price more than 6 per cent due to selling more products on discounts and with low margins, and they have warned that the outlook will remain challenging.

Financial Results and Review – Financial Year 2019 (£, Thousand)

(Source: Annual Report, Company Website)

In the Financial year ending 2019, the company reported revenue of £617,442 thousand in the financial year ending January 2019 against £591,670 thousand for the previous year of the same period. There was an increase of 4.35 per cent in revenue due to a strong sales performance in the UK, Europe and North America. The Gross profit stood at £360,095 thousand for FY2019 as compared to £360,805 thousand in FY2018, down by £710 thousand due to an increase in the cost of sales in the current financial year. The operating profit for FY2019 stood at £54,502 thousand as compared to £70,727 thousand in FY2018. There was a significant decrease of 22.94 per cent due to increased administrative expenses and distribution costs for the current financial year. The profit before tax for FY2019 stood at £50,857 thousand as compared to £68,789 thousand in FY2018. The profit for the year stood at £40,728 thousand in FY2019 against £52,744 thousand in FY2018. The basis earning per share stood at 91.5 pence in FY2019 as compared to 119.0 pence in FY2018.

Share Price Performance

Daily Chart as at Mar-22-19, before the market close(Source: Thomson Reuters)

On 22nd March 2019, at the time of writing (before market close, GMT 02:40 PM), Ted Baker Plc shares were trading at GBX 1,674.00, up by 4.56 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 2,850.00/GBX 1,312.00.

Conclusion
Although the company’s revenue increased in the financial year ending 2019, the profitability margins have remained stagnant or declined. Moreover, the company is trading near its 52-week low, raising doubts at its upside potential at current prices. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The company’s P/E, P/B and P/CF multiples are significantly higher as compared to the industry multiples.Considering the ongoing consumer uncertainty, accelerated promotional initiatives across many global markets, unseasonal weather in North America and stock trading near its 52w low. We recommend to avoid the stock given the risks and other factors while it trades at low levels.

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

*The buy recommendation is also valid for the current price as covered in the report (as on Mar-22-19).

*GBp or GBX are interchangeably used for Pence Sterling.

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