Taylor Wimpey Plc – Building a Wide range of Homes for Managing Community Engagement

Taylor Wimpey Plc (LON: TW) is a residential property developer company. The Company operates from 24 regional offices.

Recent News
On 5^th June 2020, Taylor Wimpey announced the selection of PwC (PricewaterhouseCoopers LLP) as external auditor of the group.

Update on Business Performance
On 5^th June 2020, Taylor Wimpey released an update on the business performance. The group’s construction activities are progressing well in the sites located across England and Wales. The Company is preparing to commence construction on Scottish sites as per the guidance of the Scottish government. TW opened sales centres and show homes on appointment only basis in England and all employee have resumed their duties. The Group is focused on ensuring the health and safety of its employees and are responding well to new methods of working. TW’s order book remained strong, with an increase in reservations. The Group witnesses good interest levels for a 5 per cent discount scheme launched for care workers and NHS workers. The Companyisactively engaged in the land market and has started exchanging site with an objective to increase opportunities.

Share Price Performance

Daily Chart as of June 5^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Taylor Wimpey Plc shares were trading at GBX 163.65 at the time of writing before the market close (at 11:08 AM GMT+1) on 5^th June 2020 and were up by 3.09% versus the previous day closing price. Stock's 52 weeks High is GBX 237.70 and Low is GBX 101.00.

From the technical standpoint, its shares were trading well above its 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.

Valuation Methodology
 

Growth Catalysts
The Group has a strong balance sheet with adequate liquidity for long term growth. The Company is making efforts to grow and could be an opportunity for investors to invest.

Conclusion
In the first quarter of the financial year 2020, there were fewer cancellation in order book despite the lockdown state caused by Covid-19. The Group has been taking orders remotely, while the contraction sites were shut down.  TW after opening operations in the England and Wales are now planning to recommence activities in Scotland as per the guidance of the Scottish government. In the last few weeks, the group witnessed a healthy increase in the order book and its 5 per cent discount scheme for care workers, and NHS workers are receiving good interest. Moreover, the strong balance sheet and cash position should help the company to weather this uncertain period.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “HOLD” recommendation at the closing price of GBX 158.75 (as on 4^th June 2020).

LSL Property Services Plc – Offering residential property services with an Objective to become Market Leader

LSL Property Services Plc (LON: LSL) is UK based residential property services group, which is catering to lenders, buyers and sellers of residential properties, tenants and landlords.

Resilient Q1 Trading Update and Actions taken to combat Covid-19 Pandemic
On 5^th June 2020, LSL Property Services released an update on the trading performance for the first quarter of the financial year 2020 ending 31^st March 2020 and for April 2020 and impact of covid-19 after lockdown easing. In the Q1 FY2020, the Underlying Operating Profit increased by 62 per cent to GBP 3.4 million versus Q1 FY2019 data. The operating results from Surveying, Estate Agency and Financial Services businesses increased for the period and net debt for the period stood at GBP 42.1 million. In April, the Group reported Underlying Operating Profit of GBP 1.6 million, while the revenue declined by 56 per cent, due to the impact of covid-19 on the market. The Group is focused on maintaining income streams to tackle the impact of the outbreak, and board members will take reduced fees and salaries by one-third. The Company has an RCF (Revolving credit facility) of GBP 100 million and has sufficient liquidity throughout, as indicated by stress testing. The Group reduced net banking debt to GBP 28.4 million as on 30^th April 2020 and taken measures to preserve cash.

Share Price Performance

Daily Chart as of June 5^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

LSL Property Services Plc shares were trading at GBX 216.00 at the time of writing before the market close (at 12:02 PM GMT+1) on 5^th June 2020 and were up by 14.89% versus the previous day closing price. Stock's 52 weeks High is GBX 345.00 and Low is GBX 143.50.

From the technical standpoint, its shares were trading well above its 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.

Growth Catalysts
The group has a decent financial position with adequate liquidity and well-positioned balance sheet. The company is confident that the business model, financial strength position and market-leading positions indicate growth prospects for the company in the future.

Conclusion
The market environment in which group operate is full of uncertainty.Despite the uncertain environment, the group managedto increase Underlying Operating Profit in Q1 FY2020 and April 2020. The operating results from Surveying, Estate Agency and Financial Services businesses increased for the period and group managed to reduce net banking debt as on 30^th April 2020. After easing in the lockdown, the company reopened its Estate Agency offices promptly, resumed physical viewings and conducting valuations in a safer environment. The Group witnessed an increase in the sales activity and undertaken a large number of physical valuations, and higher demand in June 2020 to clear lender pipelines. LSL has opened 231 branches and 41 per cent of employees have resumed their duties.

Based on the above rationale, we have given a “Speculative Buy” recommendation at the current price of GBX 187.37 (as on 5^th June 2020, before the market close at 8:00 AM GMT+1).

 
Norcros Group PLC – Well-Positioned to Withstand the Extended Disruption

Norcros Group PLC (LON: NXR) is a FTSE All-Share listed Company which designs, manufactures, and markets a range of kitchen and bathroom products.

Recent News
11^th March 2020: The Board of the Norcros PLC appointed Mark Allen, as Non-Executive Director and Board Chair, with effect from 1^st May 2020.

Trading Update (as on 1^st April 2020)
As per the latest trading update, the Group’s trading is in line with expectations, while they gained market share despite the challenging conditions. Moreover, its China supply chain is operating almost a normal level. The Group estimates the underlying operating profit for the financial year 2020 to be around £31 million as against the previous forecast of £35 million. However, this reduction was regarded as temporary and exception by the Company due to the COVID-19 scenario. Given the evolving state of uncertainties, the Company has withdrawn its previous guidance for the financial year 2021. Regarding the balance sheet position, Company’s net debt is expected to be around £40 million with net debt to EBITDA of around 1.1x, on 31^st March 2020.

Share Price Performance

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

Norcros Group PLC’s shares were trading at GBX 162.50 on 5^th June 2020 (before the market close at 8.11 AM GMT+1), which was up 9.80% against the last day closing price. Stock's 52 weeks High is GBX 305.00 and Low is GBX 119.00.

From the technical standpoint, its shares were trading above its short-term support level of 50-day simple moving average prices, which reflects an upward trend in the stock and carrying the potential to move up further.

Valuation Methodology
 

Valuation Metrics

 (Source: LSE)

As on 29^th May 2020, EV/EBITDA and Price/Book multiples of the Norcros Group PLC were 3.8x and 0.9x, respectively, which were lower as compared with the Construction & Materials industry. Hence, it is indicating that the Company is trading at a lower multiple against its peers.

Growth Catalysts
The Company has well-established relationship with its suppliers and customers, and it can manage the working capital requirement despite the prevailing headwinds.

Conclusion
The Group has not been materially impacted the COVID-19 crisis and reported the overall trading in line with expectations for the financial year 2020. Moreover, the Group has adopted several actions to preserve the cash flow of the business, such as deferring all discretionary operating expenditure and non-essential capital expenditure. The Group will consider the Government's Job Retention Scheme for securing jobs and might take further Government support, if needed. Moreover, the Group is operating with a low level of debt and substantial liquidity in place. Therefore, the Group is well-positioned to withstand an extended period of reduced trading with decisive actions taken to preserve cash. With a leading market position, a wide range of brands and broad distribution channels, the Group shall return to growth as soon as market revives.

Based on the above rationale, which is supported by valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 148.00 (as on 4^th June 2020) with lower double-digit upside potential based 6.60x NTM Price/Earnings (approx.) on FY20E Earnings Per Share (approx.).
 
*All forecasted figures and Peers information has been taken from Refinitiv, Thomson Reuters.
*The “Speculative Buy” recommendation is valid for the current price as covered in the report (as on 5th June 2020).

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