Vodafone Group PLC

Newbury, United Kingdom-based Vodafone Group Plc (VOD) is a telecommunication company providing 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 25 countries.

Recent News
On 5^th September 2019, Oman Future Telecommunications ("OFT”) and Vodafone Group released a strategic partnership agreement in the Sultanate of Oman as part of the company's Partner Markets programme.

On 31st July 2019, the company announced that it had accomplished the acquisition of Liberty’s operation in Germany and the Czech Republic, Hungary, and Romania for total enterprise value (EV) of €18.4 million.

Trading Update for the quarter ended 30th June FY 2020
For Q1 FY 2020, the company reported weak revenue numbers, where revenue came in at ‎€10,653 million, a decrease of 2.3 per cent year over year. In Q1 FY 2020, revenue from European region decreased by 2.1 per cent to €7,792 million as compared with the corresponding period of the last year. In Q1 FY20, rest of the world revenue reduced by 4 per cent to €2,547 million against the same period of the last year. The muted performance came from downcast numbers in Italy and Spain during the first quarter of the financial year 2020.

Share Price Performance

Daily Chart as at September-10-19, before the market close (Source: Thomson Reuters)

On 10th September 2019, Vodafone Group Plc shares were trading at GBX 155.34 at the time of writing before the market close (at 10:05 AM GMT), down by 0.12 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 171.78/GBX 122.22. The company’s stock beta was 1.22, reflecting the higher movement of the stock as compared to the benchmark index.

Valuation Methodology


Conclusion
In the financial year 2019, the group was forced to cut its dividend per share for the first time in its history following the German sale amid sector warnings that the extra they spend on the spectrum, the fewer they have to spend on building the network via servers, new masts and base stations.

The company has been cutting costs, looking to form network-sharing deals and investing for 5G.The upgrade to 5G network, will cost billions in spectrum and deployment across all of Vodafone’s markets. The company has also acquired a 5G spectrum in Germany. In FY2020, the company is expecting between €13.8- €14.2 billion of adjusted EBITDA, reflecting lower single-digit organic growth and free cash flow pre-spectrum will be at least €5.4 billion.

Therefore, on the basis of above rationale and valuation done using the above methodology, we have given a "Hold" recommendation at the closing price of GBX 155.52 (as on September-09-2019) based on the 18.00x NTM Company’s forecasted Price-to-Earnings (approx.) multiple on the FY20E Earnings per share (approx.).
 

Medica Group Plc

Medica Group Plc (MGP) is a Health Care Equipment & Service company providing Teleradiology services. The company presently offer three services to hospital radiology departments which includes Routine plain film (Routine PF), Routine cross-sectional (Routine CS) and NightHawk.

Recent News
On 9th September 2019, Medica Group Plc announced its interim results ending June 30th, 2019.

Financial Highlights – H1 Financial Year 2019 (£, thousand)

(Source: Interim Report, Company Website)

For the first half of the financial year 2019, the company’s core collections surged by 18.2 per cent to £21,978 thousandas against £18,592 thousand in the H1 FY2018. The increase in the revenue was driven by a strong performance by services offered by the company. The company’s Gross profit increased by 15.1 per cent in H1 FY2019 to £10,463 thousandas against £9,091 thousand in the H1 FY2018. The Gross margin slightly declined to 47.6 per cent in H1 FY2019 from 48.9 per cent in the H1 FY2018, driven by updated framework pricing and contract renewals.The company’s adjusted EBITDA increased by 9.7 per cent in H1 FY2019 to £6,153 thousandas against £5,610 thousand in the H1 FY2018. The adjusted EBITDA margin declined to 28 per cent in H1 FY2019 from 30.2 per cent in the H1 FY2018. The adjusted operating profit increased to £5,339 thousandin H1 FY2019from £4,990 thousand in the H1 FY2018. The reported operating profit increased to £4,823 thousandin H1 FY2019from £4,490 thousand in the H1 FY2018. The underlying PBT (Profit before Tax) surged by 7.2 per cent to £5,204 thousandin H1 FY2019from £4,854 thousand in the H1 FY2018. The reported PBT (Profit before Tax) surged to £4,658 thousandin H1 FY2019from £4,354 thousand in the H1 FY2018. The company’s profit for the period (attributable to shareholders) stood at £3,881 thousand in H1 FY2019versus £3,547 in the H1 FY2018. The company’s basic earnings per share stood at 3.49 pence in H1 FY2019 versus 3.19 pence in H1 FY2018. The company’s diluted earnings per share were at 3.47 pence in H1 FY2019 from 3.18 pence in H1 FY2018.

Share Price Performance

Daily Chart as at September-10-19, before the market close (Source: Thomson Reuters)

On 10th September 2019, Medica Group Plc shares were trading at GBX 127.02 at the time of writing before the market close (at 10:10 AM GMT), down by 2.29 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 164.84/GBX 106.55.

Valuation Methodology

*Peers: Advanced Medical Solutions Group Plc, UDG Healthcare Plc, Integrated Diagnostics Holdings Plc, Scapa Group Plc and Uniphar Group Plc.

Conclusion
The company had shown decent growth in financial performance for the first half of the financial year 2019. Both the top-line and the bottom-line performance has improved for the period. All the company’s services are in demand and are contributing to revenue growth.

The company expects the momentum to continue in the second half of the financial year 2019. The company is focussed on developing new services and is recruiting experienced radiologists to cater to the increasing demand. The company expects its revenue to be ahead of expectations and profit to remain in line with the expectations.

Over the course of 4 years (FY14 - FY18), the company’s revenue surged from £17.91 million in FY14 to £38.97 million in FY18. Compound annual growth rate (CAGR) stood at 21.45 per cent.

Based on the decent prospects and supported by valuation done using the above method, we have given a "Speculative BUY" recommendation at the closing price of GBX 130.00 (as on 9th September 2019) based on 17.00x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 EUR = 0.897459 GBP.
*Speculative Buy recommendation is also valid for the current price as on 10^th September 2019.

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