Taylor Wimpey (TW) was formed in the year 2007, post-merger of George Wimpey and Taylor Woodrow. The company is headquartered in High Wycombe, the United Kingdom with operations department in the UK and Spain. It is the largest UK based homebuilders and has 24 offices beyond England, Scotland and Wales. In the United Kingdom, the company has three divisions – North, Central-South West and London-South East divisions. The company's total outstanding market capitalisation stood at £5.96 bn and dividend yield stood at 3.58% (as on March-25-2019).

Business operations also spread across supply chain logistics, known as Taylor Wimpey Logistics. In the logistics business, they provide the delivery of construction related material. The company shares are traded at the London Stock Exchange and a part of the FTSE 100 benchmark index.

Financial Overview (FY18, £million)


(Source: Annual Results, Company Website)

The company’s reported revenue was increased by 2.9 per cent to £4,082 million as compared to £3,965.2 million in 2017, due to an increase in the revenue from the UK and Spain geographical division. The company’s operating profit surged to £880.2 million in 2018 as compared to £844.1 million in FY2017. There was an increase of 4.3 per cent due to the strong performance in the UK and Spain businesses. Profit before tax increased by 18.9% during FY18 to £810.4 million from £682.0 million in FY17, results for FY18 shows the focus of higher operating profit and lower expectational charges. Profit for the year rose to 18.2% during FY18 to £656.6 million vs £555.3 million in FY17, due to the decrease in the post-tax exceptional charges and improvement in performance. Basic EPS grew by 18.2 per cent to 20.1 pence in FY18 as compared to 17.0 pence in FY17. In 2019, shareholders will receive a total dividend of £600 million. At the end of 2018, the secured order book stood at £1,782 million (+9.5% year on year).

EBITDA margin reported was 21.7 per cent in FY 2018, considerably higher against the industry median of 13.4%. Net margin of 16.1 per cent for FY18 stood significantly higher than the industry median of 8.3 per cent, reflecting high profitability growth as compared to industry performance. Return on equity stood at 20.6 % in 2018, slightly higher than the industry median of 18.0 per cent. On the liquidity front, TW current ratio was higher than the industry median. On the leverage front, the debt/equity ratio was lower as compared with the industry median.

Growth Perspective

As at February 2019, the secured order book stood at £2,170 million (2018 same period: £1,961.0 million) and represented 9,622 homes developed driven by new construction contracts signed. Company’s revenue for FY2019 will be lower than in 2018, reflecting the impact of the regulatory changes in the UK and EU.

Share Price Performance

Daily Chart as at Mar-14-19, before the market close(Source: Thomson Reuters)

On 14th March 2019, at the time of writing (before market close, GMT 9:29 AM), Taylor Wimpey shares were trading at GBX 182.80, down by 0.552 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 206.21/GBX 127.80. At the time of writing, the share was trading 11.35% lower than its 52w High and 43.04% higher than its 52w low. Stock’s average traded volume for 5 days was 9,619,434.60; 30 days - 10,564,212.97 and 90 days - 12,899,151.14. The average traded volume for 5 days was down by 8.94% as compared to 30 days average traded volume. The company’s stock beta was 0.84, reflecting slightly low volatility as compared to the benchmark index. The outstanding market capitalisation was around £5.96 billion.

Valuation Methodology


Note: All forecasted figures and Peers Selection have been taken from Thomson Reuters.

Conclusion

While broad-based challenges can be seen ahead of the group, given the current trading levels which indicate the stock movement towards 52-week high with support coming from growth drivers like increased revenue mainly because of performance from UK & Spain division and increased cash inflow from operations and the valuation done using the above method,we have given a BUY recommendation at the closing price of GBX 181.85 (as on 13th March 2019) with single-digit upside potential based on 9.74x NTM Price/Earnings on FY19E earnings per share.
 

Barclays PLC (BARC.L)

Barclays PLC is a global financial services provider offering personal and business banking, wholesale and commercial banking, and private and investment banking solutions to individuals, SMEs, corporates, and high-net-worth clients. It offers deposits and accounts, cards, loans, and investment solutions. The bank also offers services such as foreign exchange, transactional lending, mobile banking, premier banking, international banking, and online banking. Barclays caters to retail customers, small to medium-sized enterprises, and large corporates. The bank operates across the Americas, Asia, the Middle East, Europe, and Africa. The company’s headquartered in London, the UK. The company's total outstanding market capitalisation stood at £28.09 bn and dividend yield stood at 4.18% (as on March-25-2019).

 
Financial Overview (FY18, £million)

(Source: Annual Reports, Company Website)

Barclays’ total income stood at £21,136 million in FY18 compared with £21,076 million in FY17. Consolidated Net Interest Income for FY18 stood at £9,062 million against £9,845 million in FY17, declined by 8% in FY18. Group’s Pre-tax profit stood at £3.5 billion in FY18, including £2.2 billion of litigation and conduct charges, primarily related to £1.4 billion settlement with the US Department of Justice with regards to Residential Mortgage-Backed Securities. Earnings per share stood at 21.9 pence, improved considerably during 2018, compared with negative EPS in FY17 of 3.5 pence. Banks' consolidated return on tangible equity (RoTE) stood at 8.5% in FY18 as compared with negative 1.2% in FY17. Barclay’s UK reported RoTE of 16.7% during FY18 compared with 17.8% in FY17, decreased mainly on account of dip in PBT by 3% to £2.4 billion in FY18. Barclays International reported RoTE of 8.7% which was considerably higher against 4.4% in FY17, primarily due to an increase in the profit before tax by 10% to £3.9 billion.

The reported net interest margin in FY2018 decreased by 0.21 per cent to 3.53 per cent against 3.74 per cent reported last year. In FY18, Loan growth stood at 0.8% which was remarkably lower than the industry median of 4.9%. On financial leverage front, the asset-equity ratio was higher as compared to the industry median. Pre-tax Return on Equity (ROE) stood at 5.5 per cent which was lower than the industry median of 9.6 per cent.

Recent News

On 22nd February 2019, Company announced that Gerry Grimstone has decided to step down from his role as Non-Executive Director of Barclays Plc and Chairman of its subsidiary, effective from the end of February 2019, and Bank announced that Nigel Higgins selected as Chairman-elect of Barclays Plc, would join Barclays board on 1st March 2019.

On 18th May 2018, Bank acquired residential Mortgage Portfolio in Ireland for US$5.41 billion from Lloyds Bank.

Share Price Performance

Daily Chart as at Mar-14-19, before the market close(Source: Thomson Reuters)
 
On 14th March 2019, at the time of writing (before market close, GMT 2:58 PM), Barclays PLC shares were trading at GBX 165.20, up by 0.79 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 220.18/GBX 144.99. At the time of writing, the share was trading 24.97% lower than its 52w High and 13.94% higher than its 52w low. Stock’s average traded volume for 5 days was 57,081,470.00; 30 days - 48,775,188.23 and 90 days - 42,347,468.89. The average traded volume for 5 days was up by 17.03% as compared to 30 days average traded volume. The company’s stock beta was 0.72, reflecting low volatility as compared to the benchmark index. The outstanding market capitalisation was around £28.09 billion.

Valuation Methodology


 
Note: All forecasted figures and Peers have been taken from Thomson Reuters.
 
Conclusion

Adequate Capital, Cost efficiency, Adequate liquidity and Asset quality makes Barclays attractive at current market price. Based on strong fundamental performance and the valuation done using the above method, we have given a BUY recommendation at the closing price of GBX 163.9 (as on 13th March 2019) with single-digit upside potential based on 5.7x NTM Price/Cash Flows on FY19E cash flow per share.

*The buy recommendation is also valid for the current price as covered in the report (as on Mar-14-19).

Note- GBp or GBX are interchangeably used for Pence Sterling.

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