WM Morrison Supermarkets Plc - UK’s 4th Largest Supermarket Chain, with Robust Liquidity
WM Morrison Supermarkets Plc (LON: MRW) is a United Kingdom-based company, which operates in the retail supermarket stores and associated activities.

COVID-19 and Q1 Sales Update (as on 12th May 2020)
Overall results reflected an increase of 5.7 per cent in total sales (excluding fuel) in Q1 despite the highly volatile environment and weak Easter trading due to the continuing lockdown in the United Kingdom. For the 14-week period from 3 February to 10 May, the Group LFL sales were up by 5.7 per cent (excluding fuel), with retail sales increased by 5.1 per cent and wholesale sales surged by 0.6 per cent. As earlier announced, retail contribution to LFL stood at 5 per cent in the first six weeks of the financial year 2021. Sales were flat for the first four weeks of the financial year 2021. For the weeks five to seven in early/mid-March 2020, there was considerable stocking up and lifting sales. The Company had deferred its special dividend pay-out for the financial year 2020, driven by the unprecedented nature of events around Coronavirus.

Share Price Performance

Daily Chart as of June 11^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

WM Morrison Supermarkets Plc shares were trading at GBX 186.10 at the time of writing before the market close (at 3:49 PM GMT+1) on 11^th June 2020 and were down by 1.12% versus the previous day closing price. Stock's 52 weeks High is GBX 210.00 and Low is GBX 157.55.

From the technical standpoint, 14-day RSI is currently hovering in an oversold zone and carry the potential to trigger an upside bump in the stock price.

Valuation Methodology


Conclusion
At this current stage, the impact of COVID-19 stays uncertain. The Group continue to monitor various FY21 sales, profit, and cash flow scenarios, but have minimal visibility or certainty around a precise outcome. In 2020, the sales have shown improving trend, despite the challenging circumstances caused by Covid-19 pandemic. WM Morrison had shown decent financial performance during FY20. The like-for-like retail sales grew by 5% so far (first six weeks) in FY20. The company is operating at a robust liquidity position to manage any short-term financial shocks.

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 184.95 (as on 11^th June 2020, before the market close at 8:20 AM GMT+1) with single-digit upside potential based on 14.55x NTM Price/Earnings (approx.) on FY21E earnings per share (approx.).

Tate & Lyle Plc - Resilient business with Strong Balance Sheet and Low Leverage

Tate & Lyle Plc (LON: TATE) is a British-headquartered company, which provides solutions and ingredients for beverage, food and industrial markets.

Financial Highlights – Strong Financial Performance and Excellent Operational Execution (31^st March 2020)

(Source: Annual Report, Company Website)
 
In the financial year ending 31^st March 2020,the adjusted revenue increased by 2 per cent to GBP 2,882 million, while statutory revenue surged by 5 per cent (in constant currency). Group statutory profit before tax (PBT) increased by 23 per cent to GBP 296 million in FY2020 versus GBP 240 million in FY2019, driven by lower exceptional costs. Statutory diluted earnings per share surged by 35 per cent to 52.1 pence versus 38.6 pence in FY2019. The adjusted free cash flow for the financial year 2020 stood at GBP 247 million.Total dividend per share increased by 0.7 per cent to GBP 29.6 pence in FY20.

Share Price Performance

Daily Chart as of June 11^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Tate & Lyle Plc shares were trading at GBX 672.40 at the time of writing before the market close (at 3:51 PM GMT+1) on 11^th June 2020 and were down by 0.88% versus the previous day closing price. Stock's 52 weeks High is GBX 811.40 and Low is GBX 493.83.

From the technical standpoint, 14-day RSI is currently hovering in an oversold zone and carry the potential to trigger an upside bump in the stock price.

Valuation Methodology


Conclusion
The financial year 2020 has been another year of consistent delivery. The Company made good progress executing the strategy with robust revenue and profit growth from Primary Products and Food & Beverage Solutions. In the light of COVID-19, the Group is taking several actions to preserve cash, reduce costs, and maintain financial strength. The productivity programme surged to USD 150 million over 6 years from USD 100 million over 4 years. TATE witnessed a strong balance sheet, with more than USD 1 billion in available liquidity and net debt of GBP 451 million.

The company has been focussing on creating high-quality products and services, which had resulted in a higher level of customer satisfaction. Moreover, the surging global demand for healthier food and beverages holds the potential for a bright future. The Group has a robust operating capability and product portfolio to navigate the uncertain period successfully.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the current price of GBX 669.20 (as on 11^th June 2020, before the market close at 11:25 AM GMT+1) and will recommend fresh buying at the right time.

Greencore Group Plc – Operating with Strong Financial and Business Model

Greencore Group Plc (LON: GNC) manufactures, distributes and markets convenience foods and ingredients. The Company currently operates across two segments: Convenience Foods and Ingredients & Property.

Recent News
On 21^st May 2020,Greencore Group announced receiving of confirmation for eligibility to access CCFF (Covid Corporate Financing Facility) funding with a limit of GBP 300 million.

Financial Highlights - Stable Underlying Cashflow Trends in H1 FY2020 (for the 26 weeks ending 27 March 2020)

(Source: Interim Presentation, Company Website)
 
In the first half of the financial year 2020, theGroup revenue increased by 1.6% to £712.7 million in H1 FY2020 versus £701.4 million in H1 FY2019, while pro forma revenue reported a growth of 0.1%. The adjusted operating profit reduced by 14.3% to £38.3 million, and adjusted EPS stood at 5.8 pence in the first half of 2020. Including exceptional finance charge, the Group’s profit before taxation for H1 FY20 rose to £27.3 million from £5.7 million in H1 FY19. On 27th March 2020, the undrawn committed facilities and total cash stood at £267.5 million with covenant waivers agreed for bank facilities.

Share Price Performance

Daily Chart as of June 11^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Greencore Group Plc shares were trading at GBX 136.30 at the time of writing before the market close (at 3:53 PM GMT+1) on 11^th June 2020 and were down by 7.47% versus the previous day closing price. Stock's 52 weeks High is GBX 282.20 and Low is GBX 83.40.

From the technical standpoint, 14-day RSI is currently hovering in an oversold zone and carry the potential to trigger an upside bump in the stock price.

Valuation Methodology


Conclusion
The Group has started the year in line with its expectations. In the light of COVID-19 disruption, the Company has taken several actions to ensure that GNC is well-positioned to build back the business. As per the ongoing level of uncertainty, the Group’s financial guidance for the financial year 2020 was suspended on 30 March 2020. GNC has a strong balance sheet and improved Free Cash Flow which would benefit the medium terms goals of the Group. The business is focusing on its organic and inorganic investment and its strategic objectives. The Company is well placed in the diverse, attractive and growing UK food market. The Group is focusing on its growth, customer relevance and a distinctive way of working across the business. Greencore Group prospects are looking good, and it is a good opportunity to invest for the long term. Recently, the Group had appointed Emma Hynes as Chief Financial Officer and Executive Director, which would benefit the financial performance in the near term.

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 135.80 (as on 11^th June 2020, before the market close at 3:55 PM GMT+1) with single-digit upside potential based on 20.20x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
 *All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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