Atlantia SpA – Leader in Airport and Motorway Infrastructure Globally

Atlantia SpA (LON: 0I2R) is operating as an Industrial Transportation company with operations in 23 countries.

Financial Highlights – Q1 Financial Year 2020 (31^st March 2020, EUR, million)

(Source: Quarterly Report, Company Website)
 
In the first quarter of the financial year 2020, due to lower revenue from toll and aviation business for the period, the total operating revenue declined by 15 per cent to €2,210 million (Q1 FY 2019: €2,591 million). The EBITDA declined by 19 per cent to €1,271 million in the first quarter of the financial year 2020 (Q1 FY 2019: €1,561 million), reflecting lower revenue. The operating profit stood at €352 million in Q1 FY2020 (Q1 FY 2019: €555 million), reflecting a decline of 37 per cent for the period. The LBT (loss before tax) from continuing operations stood at €25 million in Q1 FY2020 (Q1 FY 2019: PBT (profit before tax) of €324 million). The loss for the period stood at €29 million in the first quarter of the financial year 2020 (Q1 FY 2019: Profit before the period of €229 million). The Net debt declined by 3 per cent to €35,470 million as on 31^st March 2020. The Capital expenditure stood at €361 million for the period, reflecting an increase of 8 per cent.

Share Price Performance

Daily Chart as of July 7^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Atlantia SpA shares were trading at EUR 14.83 at the time of writing before the market close (at 1:23 PM GMT+1) on 7^th July 2020 and remained the same versus the previous day closing price. Stock 52 week High and Low were EUR 24.95 and EUR 9.17, respectively.

From the technical standpoint, the shares were trading well above the short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Key Risks
The Company operates in multiple geographies, and its profits can be impacted negatively due to foreign exchange rate fluctuations. Furthermore, the sector is exposed to political, financial and operational risks, each of which has the potential to significantly impact company/industry performance.

Conclusion
In the first quarter of the financial year 2020, the financial performance has declined for the period. Both the top-line and the bottom-line performance has declined for the period, while the profitability remained in the negative zone. The revenue from core operations has declined for the period. The Group managed to reduce its net debt, while the capital expenditure has increased. Atlantia has managed to control its operating expenses which shows enhanced operational efficiencies. The Group operations are impacted by the outbreak of a covid-19 pandemic, have been focusing on strengthening the balance sheet, return with capital discipline and reducing costs to preserve cash. The Group expect a gradual recovery in its operations in the second half of the financial year 2020.

Based on the healthy financials and growth prospects, we have given a “Speculative Buy” recommendation at the current price of EUR 14.83 (as on 7^th July 2020, before the market close at 1:23 PM GMT+1).

John Menzies PLC – Anticipating Second Quarter to Report Better than Expected

John Menzies PLC (LON: MNZS) is FTSE All-Share listed Company which provides global aviation services. Primarily, it focuses on providing logistics services to the airline industry. The Company’s business is differentiated into three geographical segments: Americas, EMEA and Rest of World.

On 29 September 2020, the Group is expected to announce the interim results for FY20.

Recent News:
26 June 2020: The Company’s Chief Executive Officer, Giles Wilson shared his intention to leave the Group but will stay with the Company until 31 August 2020. He will take up the position of Chief Financial Officer (CFO) with William Grant & Sons.

Trading Updates
As per the update published on 22 June 2020, the Company’s trading for Q2 FY20 has been ahead of market expectations. It was driven by the recovery in flight activity from early July. Although the fuelling and grounding activities in April and May, were still approximately lower than in 2019. Meanwhile, the Group has also adopted additional measures to ensure a flexible and robust balance sheet to navigate the crisis period. The performance of cargo division continues to be relatively resilient, and total volumes were around 37% down year on year in April. In such a scenario, the Board did not provide any financial guidance for FY20. Meanwhile, the Company is maintaining a decent liquidity position with cost actions implemented and cash flow support of availed government schemes.

Share Price Performance
 
1-Year Chart as at 7 July 2020, before the market close (Source: Refinitiv, Thomson Reuters)

John Menzies PLC’s shares were trading at GBX 127.59 on 7 July 2020 (before the market close at 9.20 AM GMT+1), which was up by 2.75% against the last day closing price. Stock 52 week High and Low were GBX 489.50 and GBX 66.90, 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.
 
Valuation Methodology
 

Risk Assessments
The tremendous reduction in the activity level of aviation services since Covid-19 pandemic has adversely affected the business. The Company can confront bad debt issues from airline customers, and thus, exposed to liquidity risk.

Conclusion
The Group has adopted several actions to retain flexible and robust financial position through the crisis. The activity level remained subdued until June 2020; however, the Company is anticipating a recovery from July onwards. The Group has substantial funding to reinvest in future opportunities once the market recovers. It has maintained a close dialogue with lenders for revised banking covenants. Overall, the Board is confident in the growth potential of the aviation services in the long-term and believes that it will emerge stronger from this prevailing disruption, as a market leader.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the current price of GBX 127.59 (as on 7 July 2020, before the market close at 9.20 AM GMT+1 ) and will recommend fresh buying at the right time.
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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