Tesco Plc

Tesco Plc (LON: TSCO) is a United Kingdom-based leading retailer company, with 450 thousand colleagues. The company serve millions of clients every week through stores as well as online space. It mainly operates as a retailer of grocery products. 

Trading Update (Q3 and Christmas Update)
On 9^th January 2020, Tesco released an update for Q3 trading period for 13 weeks ending 23^rd November 2019 and Christmas for 6 weeks ending 4^th January 2020. Though the UK environment remained full of challenges, the company had been able to outperform the market due to its strong operational delivery and attractive customer offer. The customers were benefited from low prices. The company during the Christmas period performed well in terms of value and volume and delivered a strong performance in the fresh food segment. The company’s 'Festive 5' vegetable offer and plant-based foods were complemented well by improvement in quality and price. The company witnessed improvement in customer satisfaction with its shopping trip. The online grocery business across the 19 weeks delivered more than 14 million orders. The company launched Clubcard Plus in November and saw a positive response from its customers. The company reviewed its Malaysia and Thailand businesses, which include evaluation for sale of businesses as well. The Tesco bank sales went up by 0.1 per cent in Q3, 1.6 per cent during the Christmas period and 0.5 per cent for the 19-week period.

Share Price Performance

Daily Chart as of February 12^th, 2020, before the market close (Source: Thomson Reuters)

Tesco Plc shares were trading at GBX 254.10 at the time of writing before the market close (at 1:46 PM GMT) on 12^th February 2020 and were up by 0.12% versus the previous day closing price. Stock's 52 weeks High is GBX 260.40 and Low is GBX 210.70. The shares of the company have delivered a positive return of 9.48 per cent in the last three months.

Conclusion
The company has delivered a decent financial performance in the third quarter of the financial year 2020. The external conditions are challenging, and the company is facing challenges in the Central Europe business sales. There are some uncertainties such as Brexit, macroeconomic environment, etc. but still the company has delivered its turnaround plan and transform its business. The company is expecting the second half of the fiscal year 2020 to be better than the first half of FY 2020. The company is in a strong position to generate sustainable growth, and it is looking attractive to invest for the long term.

Tesco’s Lotus business would be a prize for any of these big Chinese-Thai family groups, which face off against one another in Thailand and all have big foreign operations. In a subdued United Kingdom market, the company is on track, providing the growth for the 5th consecutive Christmas. In the Centenary year, the product offering remained very competitive, the customer proposition was compelling, and the operational performance was decent.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 251.12 (as on 12th February 2020, before the market close at 9:15 AM GMT).

Plus500 Ltd

Plus500 Ltd (LON: PLUS) is a provider of CFDs (Contracts for Difference) based out of Israel. The group operates an online trading platform for shares, forex, commodities, ETFs, options and indices for retail clients and innovates trading technologies.

Recent News
On 12^th February 2020, Plus500 announced the proposal for share buyback programme of USD 30 million shares of the company. 

Financial Highlights – Financial Year 2019 (31^st December 2019, USD, million)

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, driven by the lower revenue generation in the first half of the financial year 2019, the company’s revenue declined by 51 per cent to USD 354.5 million versus USD 720.4 million in FY2018. The EBITDA declined by 62 per cent from USD 506 million in FY2018 to USD 192.3 million in FY2019. In the financial year 2019, the reported operating profit stood at USD 190.1 million versus USD 505.3 million in FY2018. The PBT (Profit before tax) stood at USD 189.3 million in FY2019 versus USD 503 million in FY2018. The net profit declined by 60 per cent from USD 379 million in FY2018 to USD 151.7 million in FY2019. The company’s earnings per share (basic and diluted) declined by 59 per cent to 1.35 cents in FY2019 from 3.33 cents in the financial year 2018.

Share Price Performance

Daily Chart as of February 12^th, 2020, before the market close (Source: Thomson Reuters)

Plus500 Ltd shares were trading at GBX 936.20 at the time of writing before the market close (at 2:24 PM GMT) on 12^th February 2020 and were up by 2.79% versus the previous day closing price. Stock's 52 weeks High is GBX 1,198.00 and Low is GBX 397.18. The shares of the company have delivered a negative return of 0.21 per cent in the last month.

Valuation Methodology

*Peers: Burford Capital Ltd, Non-Standard Finance Plc, Arrow Global Group Plc, Close Brothers Group Plc and Rathbone Brothers Plc.

Conclusion
During the current period, the company continued to concentrate on providing substantial improvements to the trading platform, through the addition of functionality which appeals to more sophisticated traders and to the client service. In the previous year, European regulatory agencies put restrictions on the sale of Contracts for Differences, which resulted in a decline in the financial performance in the financial year 2019. The company believes that the condition has been stabilised and trading patterns has been adjusted after the regulatory changes. The company’s performance for the financial year 2020 is dependent on the financial market conditions. The company’s main emphasis was on the restriction on the leverage limit. Global political uncertainties make the financial markets weak and will gradually reduce the number of trading expectations for the shareholders.

Based on the headwinds faced by the company, we have given a “WATCH" recommendation at the current price of GBX 956.40 (as on 12^th February 2020, before the market close at 8:35 AM GMT), while we look for any upcoming catalysts.
 
*All forecasted figures and peer information have been taken from the Thomson Reuters.
*Currency Rate is 1 USD = 0.77119 GBP.

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