Investec Plc - Strong Balance Sheet with Robust Capital and Liquidity Levels

Investec Plc (LON: INVP) is an FTSE 250 listed specialist bank and asset manager. It serves a selective client base with various financial services and products.

The Company will release the pre-closing update on 18 September 2020.

Recent News

On 5 August 2020, Investec announced the appointment of PwC (PricewaterhouseCoopers Incorporated) as joint external auditors effective from 1 April 2023, with subject to regulatory approval from Prudential Authority of South Africa.

Financial Highlights – Financial Year 2020 (31 March 2020)


(Source: Annual Report, Company Website)
 
For the financial year ending 31 March 2020, due to the impact of Covid-19 disruption, the adjusted operating profit declined by 16.8% to £608.9 million (FY2019: £731.9 million). The adjusted earnings attributable to shareholders declined to £439.9 million in the financial year 2020 (FY2019: £573.9 million). The adjusted basic earnings per share declined to 46.5 pence in FY2020 (FY2019: 60.9 pence), while basic earnings per share increased to 115.3 pence in FY2020 (FY2019: 52 pence). The Group reported a reduction in the net asset value to 414.3 pence in FY2020 (FY2019: 434.1 pence). INVP has decided not to declare a final dividend, resulting in a full-year dividend per share of 11 pence (2019: 24.5 pence).

Share Price Performance


Daily Chart as of August 7, 2020, after the market close (Source: Refinitiv,Thomson Reuters)
 

Investec Plc shares closed at GBX 143.85 at the time of writing after the market close on 7 August 2020 and down by 2.80% versus the previous day closing price.Stock 52 week High and Low were GBX 388.33 and GBX 122.55, respectively.
From the technical standpoint, 14-day RSI is currently in an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Key Risks

The Group performance is impacted by lower interest rates, elevated impairments and muted client activity. Due to the outbreak of covid-19 pandemic, it has been difficult for the Company to make forecasts.

Valuation Methodology



Conclusion

The Company has improved financial performance in FY2020 on a reported basis. Moreover, the Group entered the financial year 2021 with a robust capital position and further plan to maintain a decent level of liquidity. The Group remains focused on controlling costs and improving efficiencies. The outlook seems to be cautious in the short-term but building growth for the long-term. The Group is continuously monitoring and managing oversight of the loan portfolio with ongoing stress testing, scenario modelling and client engagement to mitigate emerging risks.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing price of GBX 143.85 (as on 7 August 2020) and will recommend fresh buying at the right time.

Eurasia Mining Plc – Vastly Experienced Management Team

Eurasia Mining Plc (LON: EUA) is a mining company engaged in the production of gold and platinum. The Company holds licenses in Central Urals based West Kytlim and Monchetundra in Russia’s Kola Peninsula.

Recent News

On 9 July 2020,Eurasia Mining announces the restoration of trading on the FTSE-AIM market and also launched a formal sale process as per the UK Takeover Code.

Financial Highlights – Financial Year 2019 (31 December 2019)
 

(Source: Annual Report, Company Website)
 
For the financial year 2019, due to lower sale of metals for the period, the revenue declined to £1,128,970 (FY2018: £2,573,329). Reflecting lower operating expenses and finance cost for the period, the LBT (loss before tax) declined to £796,268 in the financial year 2019 (FY2018: LBT of £3,241,941). The loss for the period declined to £847,158 in FY2019 (FY2018: loss for the period of £3,241,941). The basic and diluted loss per share stood at 0.04 pence in FY2020 (FY2019: basic and diluted loss per share of 0.12 pence).

Share Price Performance


Daily Chart as of August 7, 2020, after the market close (Source: Refinitiv,Thomson Reuters)

Eurasia Mining Plc shares closed at GBX 20.20 at the time of writing after the market close on 7 August 2020 and up by 15.43% versus the previous day closing price.Stock 52 week High and Low were GBX 22.00 and GBX 0.40, respectively.
From the technical standpoint, 14-day RSI is currently in an overbought zone, which means the stock price could decline in the short term.

Key Risks

The Group may face risks related to project development and exploration if it fails to develop or discover ore reserve which is economically recoverable, fail to conclude feasibility study or fail to obtain approvals or licenses for exploration and mining. Overall business of the Company is affected by a change in government policies and regulations.

Conclusion
The Company had shown decent growth in the financial performance for the financial year 2019. Although the Company’s top-line performance had declined, the bottom-line performance has improved for the period. The economic environment in which the Company operates is uncertain and is expected to remain the same in the near future. The Group expects the market deficit to increase in 2020 with expected strong gains in demand for autocatalyst, especially in the Chinese market, which is recovering quickly from covid-19. Moreover, the company’s share price is trading near a 52-week high, which raises doubt over its upside potential.

On the basis of above rationale, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 20.20 (as on 7 August 2020), while we look for any upcoming catalysts such as an increase in demand for rhodium and palladium.

Henderson Far East Income Limited – Focused on Asia Pacific region to Deliver Growth

Henderson Far East Income Limited (LON: HFEL) is an investment trust focused on delivering income growth across the Asia Pacific region.

Financial Highlights – Financial Year 2019 (31 August 2019)


(Source: Annual Report, Company Website)
 
For the financial year ending 31 August 2019, reflecting higher investment income, the total income increased to £36,351 thousand (FY2018: £14,942 thousand). The profit before finance cost and tax stood at £31,448 thousand in FY2019 (FY2018: £10,077 thousand). The profit for the period stood at £28,306 thousand in the financial year 2019 (FY2018: £6,595 thousand), reflecting higher revenue and operating income. The basic and diluted earnings per share stood at 22.43 pence in FY2019 (FY2018: 5.44 pence).

Share Price Performance


Daily Chart as of August 7, 2020, after the market close (Source: Refinitiv,Thomson Reuters)
 

Henderson Far East Income Limited shares closed at GBX 318.00 at the time of writing after the market close on 7 August 2020 and up by 0.32% versus the previous day closing price.Stock 52 week High and Low were GBX 380.00 and GBX 236.30, respectively.

From the technical standpoint, 14-day RSI is currently in an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Key Risks

The Company made poor decisions related to investment strategy, such as asset allocation, level of gearing, which may result in underperformance versus peer companies. The Group has to comply per regulations with multiple regulatory authorities, failure to do so will result in regulatory, legal and accounting risks.

Conclusion

The Group has shown an increase in financial performance in the financial year 2019. Both the top-line and the bottom-line performance have improved with improved profitability margins. The Group remains optimistic on Asia Pacific markets outlook but with caution. The valuations of the Asia Pacific markets remained attractive as compared to other world markets and underlying economic growth of regions is expected to be more resilient due to strong growth expected from the Chinese market. Reflecting higher investment income and gain from investments, the Group delivered an EPS growth of above 300% in FY19 against last year comparatives.

Based on the above rationale, we have given a “Speculative Buy” recommendation at the closing price of GBX 318.00 (as on 7 August 2020).
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.
*The “Speculative Buy” recommendation is valid for the current price as covered in the report as on 10 August 2020.
*Dividend Yield may vary as per the stock price movement.

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