Vodafone Group Plc (LON: VOD)

Business Overview
Vodafone Group Plc is a prominent leader in technology communications, with fixed, broadband, mobile and TV network. It’s headquartered is based in the United Kingdom. It provides a range of services including mobile communication, fixed communication, unified communication, internet of things (IoT), cloud hosting and security & carrier services. The company is mainly operating in two geographies, AMAP (Africa, the Middle East and the Asia Pacific) and Europe which comprise of 24 countries. As per the latest data on 30 September 2019, Vodafone has around 27 million fixed broadband clients, 22 million TV clients, and 625 million mobile clients, comprising all of the clients in the company’s joint ventures and associates.

Recent News
On 29^th January 2020, the company announced that it had been in talks with Saudi Telecom Company ("stc") in reference to a potential sale of Vodafone Egypt. Vodafone is planning to sell its 55 per cent shareholding in Vodafone Egypt to stc.

Trading Update - Q3 FY2020 (31^st December 2019, Euro, million)

(Source: Interim Report, Company Website)

In the third quarter of the fiscal year 2020, the Group’s revenue increased by 6.8 per cent to €11,750 million as compared to €10,998 million on reported basis. The company’s revenue on organic growth basis grew by 0.8 per cent to €9,733 million as compared to €9,153 million. It was due to the benefits from the acquired Liberty Global assets. The Group has witnessed good growth in Rest of the World (Q3: 9.1%, Q2: 8.9%) organically as the company continued its recovery in South Africa. The company has expected full year adjusted EBITDA guidance in the range of €14.8-15.0 billion. The company expected free cash flow of approximately €5.4 billion in the fiscal year 2020.

Share Price Performance

Daily Chart as on 5^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 5^th, 2020, Vodafone Group Plc shares were trading at GBX 154.11 at the time of writing before the market close (at 9:00 AM GMT), up by 2.0 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 169.46/GBX 122.22. The stock price has given9.38 per cent returns during the previous year. In the last one month the stock price has given 4.9 per cent returns.

Conclusion
During the third quarter of the fiscal year 2020, the company grew organically as well as on reported basis. On 4th December 2019, the company announced that they are collaborating with Amazon Web Services (AWS) which would benefit its business. Now, the developers can simply develop innovative applications on the Amazon Web Services API and operate them from the 5G network node closest to their end-users.  In most of the major European markets, the company has now secured network sharing agreements. The company released a key long-term wholesale collaboration with Virgin Media in the United Kingdom, in order to enhance the use of the network assets. In May 2020, the company anticipate the European Tower Co to be operational and continue to unlock the substantial value implanted in the tower infrastructure. The upgrade to the 5G network will cost billions in spectrum and deployment across all of Vodafone’s markets. The digital transformation is already generating a healthier experience for the clients, enhancing the differentiation, supporting growth and at the same time decreasing the structural costs.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 151.08 (as on 5th February 2020, before the market close at 8:18 AM GMT).

Barratt Developments Plc (LON: BDEV)

Business Overview
Barratt Developments Plc is engaged in acquiring land, obtaining planning consents and building homes. The company has a private home offering with price ranging from GBP 70,000 to more than GBP 1 million. The company builds homes ranging from 1-bedroom flats to 6- bedroom family homes. The company operates in around six regions delivering over 17,319 homes. The company purchases land in targeted locations and designs homes for its customers using standard house designs.

Recent News
On 5^th February 2020, the company announced its half year results for the fiscal year 2020.

Financial Highlights - H1 FY2020 (31^st December 2019, GBP, million)

(Source: Interim Report, Company Website)

In the first half of the fiscal year 2020, the company’s revenue grew by 6.3 per cent to GBP 2,266.2 million as compared to GBP 2,132 million in the fiscal year 2019. During the period, profit from operations increased by 2.9 per cent to GBP 421.7 million against GBP 409.7 million in H1 FY2019. Adjusted operating margin increased by 40 bps to 19.4 per cent in the first half of the fiscal year 2020. Total homes completed increased by 9.1 per cent to 8,314 versus 7,622 in H1 FY2019. Basic earnings per share during the period was 33.8p, up by 3.4 per cent. The company declared a dividend of 9.8p per share in the first half of the fiscal year 2020.

Share Price Performance

Daily Chart as on 5^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 5^th, 2020, Barratt Developments Plc shares were trading at GBX 850.60 at the time of writing before the market close (at 11:20 AM GMT), up by 3.59 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 862.80/GBX 520.39. The stock price has given60.22 per cent returns during the previous year. In the last one month, the stock price has given 13.75 per cent returns. And, now some correction in stock price is expected.

Valuation Methodology

*Peers: Abbey Plc, Springfield Properties Plc, Tyman Plc, Eurocell Plc, Watkin Jones Plc and Henry Boot Plc

Conclusion
The company has witnessed a strong financial and operational performance during the first half of the fiscal year 2020. The company is expecting a robust order book in the coming years. The company expects that the housing market would remain attractive, and the lending environment also remains positive with greater competition in the mortgage market. However, there are some risks and uncertainties faced by the company, which could impact the overall performance of the company. Brexit uncertainty could affect the operations of the company. The inability to secure strategic land options at an appropriate cost and quality could hamper the revenue and profitability of the company. Unavailability of enough working capital could affect the operations of the company. Any change in government policies, laws and regulations could impact the overall business of the company. The stock is trading near its 52-week high levels and some profit booking at higher levels is expected.

Based on the valuation and factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the current price of GBX 861.20 (as on 5th February 2020, before the market close at 8:50 AM GMT), with support from few catalysts needs to be evaluated at a later stage. 
 
*All forecasted figures and information have been taken from Thomson Reuters

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