Ibstock

Ibstock PLC (IBST) is a Leicestershire, United Kingdom-headquartered leading manufacturer of clay and concrete building products in the country, with 38 manufacturing plants in the UK. The company offers products for infrastructure, improvement markets, maintenance, domestic repair and new build housing. Main products offered by the group are concrete rail products, concrete fencing, concrete stone masonry substitutes, concrete roof tiles, brick components and clay bricks. By volume of bricks sold, it is the largest brick manufacturer in the UK. The operations of the group are differentiated in two operating segments, namely Clay revenue and Concrete Products revenue.

Financial Highlights (H1 FY 2019, in £m)

(Source: Company Filings)

Driven primarily by a good performance in the UK Clay business, revenue in the first half of the year increased by 6.1% to £203.3 million. Reflecting a positive impact by the transition to the new lease accounting standard, adjusted EBITDA increased by 7.5% to £59.0 in H1 2019 (1H 2018: £54.9 million). Group statutory profit before taxation declined by 17.3% to £41.0 million (1H 2018: £49.6 million), while adjusted profit before tax was £41.6 million, representing a decrease of 0.5% on the prior year. Adjusted EPS of 9.0 pence represented a marginal reduction from 1H 2018, while lower statutory profitability in the period led to a 19% decline in the statutory basic EPS to 8.1 pence in 1H 2019.

Valuation Methodology
Method:  Price/Earnings Approach (NTM)


Share Price Commentary

Daily Chart as at 06-August-19, before the market closed (Source: Thomson Reuters)
 
On 06 August 2019, at the time of writing (before the market closed, GMT 12:25 pm), IBST shares were trading at GBX 215.40, up by 1.89 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 266.00/GBX 190.70. The company's stock beta was 0.91, reflecting slightly less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £865.97 million, with a dividend yield of 3.03%.

Conclusion
The company reported that the new Eclipse soft mud brick factory in Leicestershire was supporting the industry demand and market conditions in the new build housing sector were stable. The Help to Buy scheme by the government has been supporting the local construction market, and good mortgage, high employment levels and low-interest rate augur well for the company. While the company noted that there had been some weakness due to ongoing macroeconomic uncertainty in the UK, the full-year expectations remained broadly unchanged.

Based on the prospects of the group, and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the closing price of GBX 211.40 (as on 05 August 2019) with single digit upside potential, based on 12.23x NTM Price/Earnings (approx.) on FY19E Earnings per share (approx.).
 
*Peers of the company are Forterra PLC, HeidelbergCement AG, SIG PLC, Travis Perkins PLC, Polypipe Group PLC, Ferguson PLC, Kingspan Group PLC
 

Elegant Hotels Group Plc

Elegant Hotels Group PLC (EHG) is a Barbados-based owner and operator of seven luxury hotels, consisting of 558 rooms, making the company almost twice as large (by room number) as the closest peer in the Barbados luxury leisure tourist market (four to five star). The company also operates a beachfront restaurant on the island of Barbados, which is a popular mainstay of the dining scene in Barbados. The group seeks to expand both in Barbados and across the Caribbean by leveraging its position as a leading hotel operator in Barbados.

Recent Development
The company on 9 July 2019 announced that it had received a termination notice in relation to the management contract for Hodges Bay Resort & Spa in Antigua, which was being operated by Elegant Hotels on a partially open basis. While Hodges Bay was being operated by Elegant Hotels on a partially open basis, the construction of the hotel remained incomplete due to ongoing issues and was due to open on July 2017. The group reported that in relation to Hodges Bay, the company has approximately $1.7m of balances outstanding, which is now immediately repayable.

Financial Highlights (H1 FY 2019, in $m)

(Source: Company Filings)

Driven primarily by Treasure Beach, revenue in the first half of 2019 increased by $1.2 million (3%) to $43.7 million, against $42.5 million reported in the corresponding period of the last year. While overall occupancy increased by one percentage point to 68% (H1 2018: 67%), due to reduced rates at Turtle Beach and Treasure Beach, the average daily rate declined by 1% to $532 (H1 2018: $539). Revenue per room available rose by 1% to $364 from $362 in H1 2018. Adjusted operating profit rose by 8% to $14.2m, and adjusted EBITDA was $16.4 million, up by 7% than the prior year. Reflecting a rise in gross margin of three percentage points to 62.4%, adjusted EBITDA margin rose by one percentage point from 36.1% in H1 2018 to 37.5% in H1 FY19 Adjusted profit before tax rose by 5% in the period to $12.0 million (H1 2018: $11.4 million), mainly due to an increase in finance costs of $0.5 million resulting from movements in the US LIBOR rate. Reported profit after tax rose from $8.8 million in the prior period to $11.8 million in H1 2019, while adjusted profit after tax rose to $11.8 million from $9.3m in the prior year. Reported basic and diluted earnings per share were 13.3 cents per share compared to 9.9 cents per share in H1 2018, while adjusted basic and diluted EPS rose from 10.5 cents per share to 13.3 cents per share in H1 2019.

Valuation Methodology
Method:  EV/EBITDAApproach (NTM)


Share Price Commentary
  
Daily Chart as at 06-August-19, before the market closed (Source: Thomson Reuters)
 
On 06 August 2019, at the time of writing (before the market closed, GMT 10:35 am), EHG shares were trading at GBX 69.50, down by 0.71 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 78.85/GBX 61.00. The company's stock beta was 0.20, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £62.24 million, with a dividend yield of 3.80%.

Conclusion
For visitors and holidaymakers from all over the world, Barbados continues to be a hugely attractive destination, and despite a competitive market, Elegant Hotels continued to perform well. The company has taken note of ongoing uncertainty in its core visitor market of the UK and the impact on earnings due to the devaluation of sterling which has increased the cost of holidays to Barbados for UK guests. However, visitor numbers from the important markets of the UK and US have continued to rise, and the company has good visibility of bookings for the remainder of the financial year. The local government recently decreased the tax imposed on the company, and the group seeks to improve operational efficiencies using a centralised warehouse.

Based on the prospects of the group, and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the closing price of GBX 70.00 (as on 05 August 2019) with single digit upside potential, based on 7.45x NTM EV/EBITDA (approx.) on FY19E EBITDA(approx.).
 
*Peers of the company are I Grandi Viaggi SpA, Restaurant Group PLC, IFA Hotel & Touristik AG and SSP Group PLC
*The Speculative Buy recommendation is valid for the current price as covered in the report (as on 06-August-19)
*All forecasted figures and peers have been taken from Thomson Reuters.

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