BT Group

BT Group Plc (LON: BT.A) is an FTSE 100 Company, which provides communication and connectivity services. It provides services related to broadband, fixed-voice, mobile and TV to the consumers in the United Kingdom.

The Company will release Q4 and FY2021 results on 13 May 2021.

Investment Highlights – BT Group Plc – Hold at GBX 155.70

• During the covid-19 pandemic, the Company continue to make investment in networks, products and services with improved and faster connectivity to support customers.
• Despite the Covid-19 crisis, the Company delivered a strong operational performance and a relatively strong financial performance.
• In the last nine months, the Company delivered a substantial return of ~37.24% and delivered higher returns compared to the benchmark Index (FTSE-100 Index).
• From the technical standpoint, shares were trading well above the support level of 20-day simple moving average price (GBX 145.41), which reflects an uptrend in the stock and can move up further.

Key Risks

• The Company’s financial performance is impacted by the risks related to foreign exchange, interest rates, funding and liquidity and counterparties risk.
• The confidence of investor and future strategy can be impacted by changing political conditions. 

Recent News

On 23 March 2021, BT's Regulatory Affairs Director, Cathryn Ross, had announced resignation and would consider new role outside the Group.

On 18 March 2021, the Company had confirmed FTTP (“Fibre to the Premises”) build plan to 20 million premises by the mid- to late-2020s.

On 17 March 2021, BT Group’s mobile division, EE, has won 80MHz of 5G spectrum at £452 million.

Trading Update for 9M Period (31 December 2020) (released on 4 February 2021)

(Source: Quarterly Report, Company Website) 

• For the nine months period of the financial year 2021, due to the ongoing legacy product declines, impact of Covid-19 on Consumer and the enterprise units and divestments of domestic businesses in Latin America, Spain and France, the revenue declined by 7%.
• Driven by lower revenue, the profitability for the period declined on reported and adjusted basis.
• On a twelve-month rolling basis, the Enterprise retail and wholesale order intakes increased by 8% and 5%, respectively. Therefore, Global order intake surged by 1% on a 12-month rolling basis.
• The Company saw strong sales in FTTP selling in Q3 FY2021, while Openreach has recorded 17 thousand FTTP orders per week.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters) 

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

Despite a decline in the financial performance in the first nine months of the financial year 2021, the Company delivered a strong operating performance and is committed to supporting colleagues and customers. The Company expects EBITDA for FY2021 to be in between £7.3 billion to £7.5 billion. The Company managed to offset the negative impact of Huawei pre-buy and Brexit planning through cash receipt from building infrastructure in Enterprise. BT Group has narrowed its guidance for normalised free cash flow to £1.3 billion-£1.5 billion from £1.2billion-£1.5 billion. The Company is also investing in the new technology unit, i.e. Digital and will accelerate the digital and business transformation programmes. The stock made a 52-week low and high of GBX 94.68 and GBX 157.73, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for BT Group Plc at the current price of GBX 155.70 (as of 01 April 2021 at 11:39 AM GMT).

Hargreaves Lansdown Plc

Hargreaves Lansdown Plc (LON: HL.) is an Investment and Savings Platform offering services to over 1.3 million clients. It helps the clients in making informed investment decision by providing a tool and information.

The Company will release next trading update on 13 May 2021.

Investment Highlights - Hargreaves Lansdown Plc – Avoid at GBX 1,571.00

• As per valuation metrics, EV/Sales, EV/EBITDA, and Price/Earnings multiples of the Hargreaves Lansdown Plc is currently higher as compared to the corresponding multiples of the Investment Banking & Investment Services industry, reflecting overstretched valuations.
• In the last nine months, the Company delivered a negative return of ~ 1.94% and delivered significantly lower returns compared to the benchmark Index (FTSE-100 Index).
• From the technical standpoint, shares were trading below the short-term support level of 200-day (GBX 1,573.50) simple moving average price, which reflects a downtrend in the stock and can decline further.

Key Risks

• The Company has been facing a challenging market condition from the perspective of governments, investors, competition, and volatile stock markets.
• Moreover, the negative market movements due to the Covid-19 disruption has been impacting the value of assets under administration. 

Trading Update (released on 17 March 2021)

• In the first half of the financial year 2021 till 31 December 2021, the Company witnessed strong growth.
• The trading in January 2021 remained strong with strong dealing volumes, robust net new business, significant engagement from clients and net new client numbers.
• The Company experienced increased volumes of share dealing, with an increased proportion towards international equities.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company has shown a good start of the financial year 2021, with increased revenue, clients and assets. The Company has a resilient client proposition and business model. Despite the resilient business performance, Hargreaves Lansdown operates in volatile market conditions. The Company is confident toward its strategy and is focused on the needs of savers and investors based out of the UK to deliver the highest level of client service. HL. is well-positioned to deliver attractive growth for the long-term. The stock made a 52-week low and high of GBX 1,238.52 and GBX 1,902.29, respectively.

Based on the factors as highlighted above, we have given an “Avoid” stance on Hargreaves Lansdown Plc at the current price of GBX 1,571.00 (as of 01 April 2021 at 01:00 PM GMT).

*Dividend Yield may vary as per the stock price movement.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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