National Grid PLC

National Grid PLC (LON: NG) is an electricity and gas utility company. The group is one of the world’s leading investor-owned energy companies. It operates in the United Kingdom and the United States, focusing on transmission and distribution activities.

On 15^th January 2020, the company will pay the 2019/20 interim dividend to qualified shareholders. The group will also announce the 2019/20 Preliminary results on 21^st May 2020.

Recent News
On 1^st January 2020, the company release that 2019 year was the cleanest on record for Britain as, for the first time, the amount of zero-carbon power exceeded from fossil fuels for a full 12 months. This shows a combination of wind farms, solar and nuclear energy, alongside energy imported by subsea interconnectors, delivered Britain’s electricity of 48.5 per cent in 2019 as compared to 43 per cent generated by fossil fuels.  The residual 8.5 per cent was generated through biomass.

In December, the company set out plans to invest approximately 10 billion pounds in the United Kingdom’s electricity and gas and networksover 5 years, of which almost one billion pounds has been reserved to enable the transition to Net Zero comprising investments in new technology and equipment to help the ESO (electricity system operator) to operate a Net-Zero carbon electricity system by the year 2025. Eighty-five million pounds has been earmarked to help the decarbonisation of heat within the gas transmission network.

Financial Highlights (for the period ended 30 September 2019)

(Source: Interim Reports, Company Website)

For the first half of the fiscal year 2020, the company’s underlying operating profit grew by 1 per cent to GBP 1.3 billiondue to an increase in US Regulated profits. Underlying EPS of the company increased by 2 per cent to 20p due to a US tax settlement relating to prior periods. The company’s capital investment increased by 28 per cent to GBP 2.72 billion due to an increase in the US capital spending. The company declared a dividend of 16.57p per share in the first half of FY20.

Share Price Performance

Daily Chart as at January-02-20, before the market closed (Source: Thomson Reuters)

On 2^nd January 2020, National Grid PLC shares were trading at GBX 948.70 at the time of writing before the market close (at 8:15 AM GMT), up by 0.47% against the previous day closing price. Stock's 52 weeks High and Low are GBX 969.80/GBX 745.70.

Conclusion
The company is increasing the National Grid’s emissions reduction target from 80 per cent to net-zero by 2050, underlines the commitment to lead the industry towards a cleaner energy future. The UK business is expected to stay on track to deliver continued performance. In the near term, the company anticipates delivering asset growth of approximately 7% with around 5 billion pounds of annual capital investment.

For the energy industry, this is an exciting time in 2020.The group has also entered a new decade; this cleanest year is a remarkable moment and a prospect to indicate on how much has been attained. The company stay committed to maintaining and delivering world-class networks that deliver the means to lower carbon emissions, and to meeting net-zero targets that will be helpful for the customers. The company is making a new business plan for energy transmissions and working on reducing carbon emission. The company is making capital investments with focus on customer affordability, decarbonisation and safety across all networks.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 944.30 (as on 31st December 2019).

EVRAZ PLC

EVRAZ PLC (LON: EVR) is an Industrial Metal company, having operations in the Czech Republic, Canada, Russian Federation, Italy, Kazakhstan and the USA. The company operates mining activities and is also amongst the top infrastructure steel producer worldwide.

On 30^th January 2020, the company will announce the Q4 FY2019 trading update.

Recent News
On 31^st December 2019, the company announced that it had signed an agreement of Deed of Amendment in relation to the LTA (Long-Term Transhipment Agreement) between East Metals AG and Nakhodka Trade Sea Port.

Financial Highlights (for the third quarter of 2019)
In Q3, the company’s combined crude steel declined by 3.4 per centversus Q2 FY2019. Output was impacted due to capital repairs and lower volumes at EVRAZ ZSMK. The sales of total steel products remained flat for the period. The company saw a rise in semi-finished products sales by 5.6 per cent in Q3 FY2019 as against Q2 FY2019. The coking coal products external sales remained flat QoQ. The vanadium products sales surged by 9.8 per cent in Q3 FY19 versus Q2 FY2019, due to an increased demand in China. The company declared an interim dividend for 2019 of US$ 508.17 million, while the current dividend yield was 20.48%.

Over the course of 3 years (FY15 - FY18), the company’s revenue surged from $8,767 million in FY15 to $12,836 million in FY18. Compounded annual growth rate (CAGR) stood at 13.55 per cent.

Share Price Performance

Daily Chart as at January-02-20, before the market closed (Source: Thomson Reuters)

On 2^nd January 2020, EVRAZ PLC shares were trading at GBX 404.80 at the time of writing before the market close (at 9:15 AM GMT), up by 0.20% against the previous day closing price. Stock's 52 weeks High and Low are GBX 710.20/GBX 339.19.

Conclusion
The decrease in the prices of commodities impacted the results in the first half of the year.The strength of the Russian steel market and the high level of vertical integration will continue to support the performance of the group. In the North American markets, the company was positively impacted by the removal of US Section 232 tariffs on aluminium and steel and retaliatory steel tariffs in Canada. However, the company remains focused on executing planned investment projects and implementing efficiency improvement initiatives to drive future growth. The company’s current dividend yield of 20.48% was comparatively higher as compared to its peers. Prices have also started to recover, helped by several measures implemented by the government to support the Chinese economy, which is expected to drive demand for products.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 404 (as on 31st December 2019).

Tullow Oil PLC

Tullow Oil Plc (LON: TLW) is a prominent oil & gas exploration and production company. The company has its business across 15 countries. The company manages production activities and developments across Africa, South America, Europe and Kenya.

On 15^th January 2020, the company will announce the trading statement & operational update.

Recent News
On 2^nd January 2020, the company announced that the Carapa-1 exploration well had expanded the prolific Cretaceous oil play into the company’s Guyana acreage and had encountered around four metres of net oil pay based on preliminary interpretation.   

Trading Statement (as on 13th November 2019)
The company announced a trading update for the period 24th July 2019 to 13th November 2019. The group reported that the West Africa net oil production from Ghana and non-operated portfolio is expected to be at an average 87,000 barrels of oil equivalent per day for the full year 2019. As per the group, this is marginally lesser than the prior estimates made by the company majorly because of Ghana’s production performance. The group also highlighted that the Full-year 2019 Capital Expenditure is expected to be at $540 million, and free cash flow is expected to be at $350 million. The company reported that the net debt would be approximately $2.8 billion at the end of the period.  The company also updated that the Kenya project made its first cargo exports from the East African segment worth 240,000 barrels of oil from Mombasa.

Share Price Performance

Daily Chart as at January-02-20, before the market closed (Source: Thomson Reuters)

On 2^nd January 2020, Tullow Oil PLC shares were trading at GBX 59.62 at the time of writing before the market close (at 11:30 AM GMT), down by 6.84% against the previous day closing price. Stock's 52 weeks High and Low are GBX 254.71/GBX 38.05.

Valuation Methodology

*Peers: Premier Oil PLC, EnQuest PLC, Genel Energy PLC, Hurricane Energy PLC.

Conclusion

(Source: Company Website)

The company expected average net production to c.87,000 bopd in the year 2019. The company expected free cash flow of c.$350 million and the company’s liquidity above $1 billion. Net debt is approximately to be around $2.8 billion. Capital expenditure of the company for the year is expected to be roughly $540 million. The company forecasted its production to average between 70,000 and 80,000 bopd in the year 2020 and average around 70,000 bopd for the following three years.The company will provide a full financial and operational update on 12 February 2020.

With positive implications for both the Orinduik and Kanuku blocks, the Carapa-1 result is an essential exploration outcome. While reservoir development and net pay at this site are lower than the pre-drill estimates, the company is generating enough free cash for the growth of the business of the company. The company looks promising and sustainable for the long term.

Over the last three years, the company’s financials have reported a strong growth, which indicates the strong operations of the group. Over the past three years, revenue has risen at a CAGR of 18.39%, while gross profit rose at a CAGR of 42%. Operating income was up at a CAGR of 142%, while the corresponding growth rate for net income was more than 50%, indicating strong financials over the years.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the trading price of GBX 52.79 (as on 2^nd January 2020, before the market close at 8:15 AM GMT) with lower double-digit upside potential based on 5.91x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).

Shanta Gold Ltd

Shanta Gold Limited (LON: SHG) operates in the investment in gold exploration, development and production in East Africa mainly in Tanzania. Business operations include - mining, processing, exploration and related activities.

Recent News
The company stated on 20^th December 2019, that its New Luika Gold Mine in South West Tanzania has effectively linked to the state power grid. The preliminary connection represents around 10 per cent of NLGM's power needs. Over the next 12-24 months, this is expected to surge. The cost of state grid power is around half that of self-generated power.

Q3 2019 Production & Operational Update (as on 17th October 2019)
The company reported a Gold production of 22,726 oz (ounces) in Q3 FY2019versus 19,856 oz in Q2 FY2019, while the YTD (Year-to-date) production was at 64,956 oz. In Q3 FY2019, the net debt declined by 23 per cent to US$20.7 million versus US$26.9 million in Q2 FY2019, while the gross debt declined by 15 per cent to US$25.7 million for the period. The forward sales in Q3 were down to 43,000 oz in Q3 FY2019 versus 45,000 oz in Q2 FY2019. The adjusted EBITDA was at US$16.5 million in Q3 FY2019 as against US$10.5 million in Q2 FY2019. The company’s cash balances in Q3 FY2019 was at US$11.6 million.

Share Price Performance

Daily Chart as at January-02-20, before the market closed (Source: Thomson Reuters)

On 2^nd January 2020, Shanta Gold Ltd shares were trading at GBX 9.825 at the time of writing before the market close (at 10:40 AM GMT), up by 2.88% against the previous day closing price. Stock's 52 weeks High and Low are GBX 10.40/GBX 4.

Conclusion
Inaugural connection to the State power grid is a substantial milestone for the group.In the current quarter, the company has produced more than 22,000 oz of gold, indicating a good position for the future. For the financial year 2019, the company is on track to again meet the guidance. The company’s net debt stood at 20.7 million US dollar and is now the lowest from the past six years and has declined by more than 50 per cent from the corresponding period of the last two years.

The company is facing certain riskssuch as volatility in commodity price, interest rate risks, credit risks, liquidity risks and currency risks which could affect the overall business operations of the company.

The company’s revenue is steadily increasing. The company’s net production and costs are in line with the company’s guidance. The company is making efforts to grow and could be an opportunity for investors to invest.

Based on the rationale as highlighted above, we have given a “Hold” recommendation at the closing price of GBX 9.55 (as on 31st December 2019).

Anglo African Oil & Gas PLC

Anglo African Oil & Gas PLC (LON: AAOG) is an oil & gas and mining company, domiciled at London. The company offers a wide range of services, including extraction, exploration, operations, production, management, and development of oil and gas natural resources.

Recent News
On 31^st December 2019, the company confirmed that it had received a proposal from Jub Capital Ltd. In this proposal, includes the acquisition by Jub of the ordinary shares in the capital of the companycurrently held by RiverFort; subscription for new Ordinary Shares at the Issue Price giving proceeds of around 300 thousand pounds to the company.

On 27^th December 2019,Zenith Energy Limited has signed a conditional share purchase agreement (SPA) with Anglo African Oil & Gas plc (AAOG) for the acquisition of an 80 per cent interest in its fully owned subsidiary in the Republic of the Congo, Anglo African Oil & Gas Congo S.A.U.  Zenith will own the majority 80 per cent of Anglo African Oil & Gas Plc Congo which subsequently has a 56 per cent interest in and is the operator of the Tilapia oilfield.

Financial Highlights (for the six months ended 30 June 2019)
In the first half of the financial year 2019, the company’s revenue was at £173,524versus £106,378 in H1 2018. The reported loss after tax stood at £2,452,741 against £2,171,606 in H1 2018, which reflected the significant costs that the group has incurred in building the team to capitalise on the opportunity presented by TLP-103C.

Share Price Performance

Daily Chart as at January-02-20, before the market closed (Source: Thomson Reuters)

On 2^nd January 2020, Anglo African Oil & Gas PLC shares were trading at GBX 0.6365 at the time of writing before the market close (at 10:10 AM GMT), down by 15.13% against the previous day closing price. Stock's 52 weeks High and Low are GBX 19/GBX 0.40.

Conclusion
Although the top-line performance has improved, but the bottom-line performance has declined for the period.The group expects the second half of the year to show a significant reduction in non-standard operational expenditure. The company is looking forward to increasing its production through development in Tilapia and expand its surface facilities through a field-development plan which include ten additional wells.

This strategy has been facilitated by the achievement of the drilling of TLP-103C and the detection of hydrocarbons at each level that was breached. The company was able to increase its production in the upcoming financial year 2019.

Based on the prospects of the group, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 0.6000 (as on 2^nd January 2020, before the market closed, GMT 10:21 AM).
 
 
*All forecasted figures and information have been taken from Thomson Reuters.                                                           
*Currency exchange rate taken for 1 US Dollar = 0.75698 GBP.

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