IG Group Holdings

IG Group Holdings PLC (IGG) is a provider of online trading and investment solutions. It primarily offers leveraged trading products such as contracts for difference (CFDs) and spread betting, with operations in 16 countries. The company provides traders with access to financial markets through its platforms and apps.

Revenue Trading Update – Q3 FY2019
The company’s total reported net trading revenue was £108.0 million in Q3 FY19, down by 12 per cent against Q2 FY2019 data. Active client numbers were slightly higher overall, up by 1 per cent to 125.6 thousand and up by 1 per cent across most of the reporting segments. The group continued to attract new clients with 7,742 new OTC leveraged clients in Q3 FY2019, up from 7,553 in Q2 FY 2019.

Financial Highlights (H1 FY 2019, £m)

(Source: Company Filings)

The company’s net trading revenue in H1 FY2019 was £251.0 million, down by 6 per cent. The reported operating profit stood at £112.5 million, while the group’s reported profit stood at £91.4 million, down by 15 per cent. Basic earnings per share for H1 FY2019 were 24.9 pence, down by 16 per cent against last year. The management declared an interim dividend per share of 12.96p.

Valuation Methodology


Share Price Commentary

1-Month Chart as at May-17-19, before the market closed (Source: Thomson Reuters)
 
On 17^th May 2019, at the time of writing (before the market closed, GMT 10:30 am), IGG shares were trading at GBX 483.30, down by 0.16 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 956.50/GBX 471.10. In the past one month, the stock has been falling continuously and is now lower by 9.68 per cent. The company’s stock has been under pressure as a regulatory clampdown on derivative products took its toll, which was exacerbated by reduced market volatility and lower revenue per client.

Conclusion
The company highlights that active client numbers were slightly higher in the current quarter. The Group believes that the macro demographic and economic trends of increasing wealth and financial awareness, combined with a move towards self-direction, will help to expand business. Based on a decent fundamental, and supported by valuation done using the above method, we have given a BUY recommendation at the closing price of GBX 484.10 (as on 16^th May 2019) with a high single digit-upside potential based on 11.97x NTM Price/Earnings(approx.) on FY19E earnings per share (approx).
 

Superdry Plc

Superdry PLC (SDRY) is an apparel company with a focus on providing good quality products. The company’s products are known for its quality fabrics, exclusive detailing, authentic vintage washes, hand-drawn graphics and custom fits for unique styling. 

Trading Statement – Q4 FY2019
The group’s revenue was flat in FY2019 at £871.7m, but it declined by 4.5 per cent in the last quarter. Wholesale revenue for FY2019 was £335.0m and increased by 3.6 per cent. E-commerce revenue was up by 1.6 per cent to £163.7m in FY19.

Financial Highlights (H1 FY 2019, £m)

(Source: Company Filings)

The group’s revenue was up by 3.1 per cent to £414.6 million, due to strong wholesale performance. The company’s operating profit was £28.4 million, while profit for the period was £20.2 million. The company’s underlying basic earnings per share was 11.9 pence for H1 FY2019, while statutory basic earnings per share were 24.7 pence. The company’s Interim dividend held at 9.3 pence for H1 FY2019.

Share Price Commentary

1-Month Chart as at May-17-19, before the market closed (Source: Thomson Reuters)
 
On 17^th May 2019, at the time of writing (before the market closed, GMT 11:15 am), SDRY shares were trading at GBX 451.40, up by 1.57 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 1,370.96/GBX 354.00. Though the stock has declined by only 1.24% in the past one month, it had reached a peak of GBX 534.00 (in last one month), falling by 15.46% from that peak. The company recently issued its third profit warning in eight months and said it would miss forecasts for a pre-tax profit of £54.1m-£59.4m, which has hammered the stock in the last few months.

Conclusion
The uncertainty over the Brexit is affecting the group’s business performance and it continues to be impacted by the ongoing product mix and relevance issues. The company’s operations will be impacted by the surge in the import duties particularly in Turkey and any delayed shipment will impact the availability in the distribution centre. Based on the headwinds faced by the company, we recommend investors to keep a cautious WATCH approach on the stock at the current price of GBX 451.4 (as on 17th May 2019), and support from future growth catalysts needs to be evaluated at a subsequent stage.
 

Taylor Wimpey

Taylor Wimpey PLC (TW) is a residential housing developer which operates at a regional level from 24 local offices across the country. It is one of the UK's largest residential developers and builds a wide range of properties, with a broad price range.
Financial Highlights (FY 2018, £m)


(Source: Company Filings)

The company reported an increase of 2.9% in total revenue to £4,082.0 million, mainly driven by improved completions both in Spain and the UK. Operating profit rose by 4.3% to £880.2 million, while profit for the year rose to 18.2% during FY18 to £656.6 million. The company’s adjusted basic earnings per share was 21.3 pence in FY2018 as compared to 20.2 pence in FY2017. Basic EPS was up by 18.2 per cent to 20.1 pence in FY18 as compared to 17.0 pence in FY17.

Valuation Methodology


Share Price Commentary

1-Month Chart as at May-17-19, before the market closed (Source: Thomson Reuters)
 
On 17^th May 2019, at the time of writing (before the market closed, GMT 12:10 pm), TW shares were trading at GBX 177.50, down by 0.63 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 206.21/GBX 127.80. In the past month, the stock had reached a peak of GBX 192.25. The stock was down by 7.67 per cent from its peak, and it’s down by 6.45 per cent over the past one month. Gloomy forecasts were made by the company; stating that combination of underlying cumulative inflation and exchange and rising build costs is affecting the margins has led to a decline in the share price

Conclusion
The company was successful in offsetting the lower margins by posting record sales. The company has a decent order book for the year and the housing market has remained stable. Based on decent prospects, and supported by valuation done using the above method, we have given a BUY recommendation at the closing price of GBX 178.45 (as on 16^th May 2019) with a single digit-upside potential based on 6.40x NTM EV/EBITDA(approx.) on FY19E EBITDA (approx.).
 

Smurfit Kappa Group

Smurfit Kappa Group Plc (SKG) is a provider of paper packaging solutions. It distributes, manufactures, and markets corrugated containerboards, containers and other paper-based packaging goods.

Trading Update (Q1 FY 2019)
The company’s revenue surged by 7 per cent to €2,316 million. The company delivered a robust performance with EBITDA increased by 25 per cent to €424 million for the quarter ending March. The increased performance was driven by growth in demand and the company’s focused approach on cost efficiencies as well as benefits from the company’s capital programme.

Financial Highlights – Financial Year 2018 (€m)

(Source: Company Filings)

During the year, reported revenue surged by 4% to €8,946 million, driven by higher revenue in Europe. Reported EBITDA for the financial year 2018 was €1,545 million, up by 25 per cent, while pre-exceptional profit before income tax increased by 56 per cent to €938 million. Pre-exceptional basic earnings per share were 292.2 cents for the full year 2018 and was up by 58%.

Valuation Methodology


Share Price Commentary

1-Month Chart as at May-17-19, before the market closed (Source: Thomson Reuters)
 
On 17^th May 2019, at the time of writing (before the market closed, GMT 12:35 pm), SKG shares were trading at GBX 2,170, down by 2.25 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 3,308.00/GBX 1,915.00. In the past month, the stock had reached a peak of GBX 2,421.00. The stock was down by 10.36 per cent from its peak, and it’s down by 4.27 per cent over the past one month.

Conclusion
The company's dominant market position, business performance of the Americas segment, diversified customer base and strong manufacturing capabilities are the company’s main strengths. Strategic growth initiatives, acquisitions and increasing demand for the paperboard packaging industry are likely to provide accelerating growth opportunities to the company. Based on decent prospects, and supported by valuation done using the above method, we have given a BUY recommendation at the closing price of GBX 2,220 (as on 16^th May 2019) with a single digit-upside potential based on 5.71x NTM Price/Cash Flow (approx.)on FY19E cash flow per share (approx.).

Bunzl Plc

Bunzl PLC (BNZL) is a specialist distribution company engaged in the distribution of non-food consumable products to markets such as grocery, foodservice, cleaning and hygiene, healthcare, non-food retail and safety. The company offers its products with a unique business concept to its customers.
Trading Statement (Q1 FY 2019)

Revenue during the first quarter of FY19 surged by 4% at actual currency rate. However, on a constant currency basis, revenue rose by 2.5% approximately.  In the trading statement, the group also announced that it had acquired a Netherland based distributor, Coolpack, which is primarily engaged in the supply of specialist packaging to supermarkets and food service and pharma sector.

Financial Highlights – Financial Year 2018 (£m)

(Source: Company Filings)

The company’s top-line grew by 6% to £9,079.4m on account of strong organic growth and benefit from acquisitions in North America. Adjusted operating profit stood at £614 million, up by 4%, while adjusted earnings per share were 129.6 pence, up by 12%. During the FY18, the company reported strong cash conversion of 94%. Dividend for FY18 stood at 50.2 pence and increased by 9% on a year-on-year basis.

Valuation Methodology


Share Price Commentary

1-Month Chart as at May-17-19, after the market closed (Source: Thomson Reuters)
 
On 17^th May 2019, at the time of writing (before the market closed, GMT 1:00 pm), BNZL shares were trading at GBX 2,094, up by 1.65 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 2,554.60/GBX 2,026.00. The stock has been continuously declining in the last one month, and it is now down by 19.25 per cent.

Conclusion
According to some market experts, foodservice market in the UK has been driven by increasing numbers of transactions, and Bunzl stands to benefit from the positive outlook for the foodservice industry in the UK as it provides food packaging, disposable tableware and catering equipment. Based on strong prospects, and supported by valuation done using the above method, we have given a BUY recommendation at the closing price of GBX 2,060 (as on 16^th May 2019) with a single digit-upside potential based on 17.45x NTM Price/Earnings (approx.)on FY19E earnings per share (approx.).

*The buy recommendation is valid for the current price as covered in the report (as on May-17-19)
*All forecasted figures and peers have been taken from Thomson Reuters.

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