Spectris Plc (SXS)

The United Kingdom-headquartered, Spectris Plc is a leading supplier of productivity-enhancing instruments and controls. As on November 29, 1988, shares of the company were admitted to the main market of the London Stock Exchange. Fidelity Management & Research Co., MFS International (UK) Ltd. and Marathon Asset Management LLP are the major institutional investors in the company. (Source: Thomson Reuters).

Recent Events
In the exchange filing made by the company as on September 19, 2019, the company reported that it had completed an agreement with Voith GmbH & Co. KGaA to dispose BTG Group from Spectris. Spectris Plc will receive a total cash consideration of €319m or £283m.

Interim Results: H1 FY19

Source: Company filing.

During the period under consideration, the organic growth was moderate, reflecting the more challenging macroeconomic environment. The company’s adjusted sales in the first half of 2019 grew by just 4 per cent to £759.1m from £728.0mrecorded in the year-ago period and improved marginally by 1 per cent on an organic, constant currency like-for-like basis. Adjusted Operating profit surged by 8 per cent to £83.5m, and on a like-for-like basis, it was up by 4 per cent and adjusted operating margins improved marginally to 11 per cent on a YoY basis. Adjusted EPS in the H1 FY19 stood at 52.4p/share against 50.4p/sharerecorded in the year-ago period.

At the statutory basis,the group recorded an operating loss of £46.1m against a profit of £45.5m, which dragged the group’s operating margin into negative territory to (-6.1 per cent) against the operating margin of 6.3 per cent recorded in the same period of the previous financial year. Basic loss per share during the H1 FY19 stood at 41.8p/share against the earnings per share of 74.6p recorded in the year-over period.
The board of directors of the company proposed an interim dividend of 21.9p/share, which was 7% higher on a YoY basis.

Stock Performance
 
Daily Price Chart (as on September 20, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close, at 01:21 PM GMT), shares of the SXS were trading at GBX 2,494 and declined 25 points or 0.99 per cent against the previous closing level. In the year-ago period, shares of the company have registered a 52w high of GBX 2,932 and a 52w low of GBX 1,924.50 respectively. In the year-to-date basis, the stock had delivered a price return of 10.53 per cent, and in the last one month, the stock has surged 9 per cent, respectively.

Conclusion
Spectris Plc’s performance during the first half of 2019 was moderate, driven by higher competition and ongoing challenging market situations. Also, the group reported that it could experience material damage from uncertainties over the nature of Brexit in the second half of 2019, which could lead to differing actual results from what was estimated earlier. 

Also, the company’s fundamental are shrinking as in the H1 FY19, at Statutory basis, group’s operating profit, pre-tax profit, earnings per share have dragged down substantially and adjusted return on gross capital employed also declined by 0.80pp to 13.4 per cent from 14.2 per cent recorded in the same period of the previous financial year.

Therefore, based on the above rationale, we have given a “Watch” recommendation at the closing price of GBX 2,519.0 (as on September 19, 2019), while we look for any upcoming catalysts in the near term. 

Hurricane Energy Plc (HUR)

Hurricane Energy Plc (HUR) is an oil and gas exploration and development company that discovers, appraises and develops hydrocarbon resources from fractured basement reservoirs. The company has licenses focussed on the Rona Ridge and owns a portfolio of offshore licences on the UK Continental Shelf. Pelham Capital Ltd., Crystal Amber Advisers (UK) LLP and Alken Asset Management Ltd. are the major institutional investors in the company. (Source: Thomson Reuters).

Interim Results: H1 FY19

Source: Company filing.

During the six months under consideration, the company has recorded a revenue of US$22,462K for the first time relating to a single cargo of crude oil that was sold in the H1 FY19. As a result, the group reported an operating profit of $1.2m in the first half of 2019 against the operating loss of $4.7m reported in the year-ago period. The Group’s loss after tax recorded for the first half of 2019 was at $21.2m against the loss of $75.1m recorded in the year-ago period. Basic and diluted loss per share during the H1 FY19 stood at 1.08c per share against the loss per share of 3.83c recorded in the H1 FY18.

Stock Performance
 
Daily Price Chart (as on September 20, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close, at 03:02 PM GMT), shares of the HUR were trading at GBX 46.50 and declined 1.6 per cent against the previous closing price level. In the year-ago period, the stock has touched a 52w high of GBX 64.70 and a 52w low of GBX 38.00 respectively.

Valuation Methodology
 

Conclusion
During the first half of 2019, the company recognised revenue of US$22,462K for the first time relating to a single cargo of crude oil that was sold. Losses at the operating level reduced substantially against the previous comparable period.

Also, its shares were trading well above the near-term support levels like 30-day and 60-day simple moving average prices and marginally above the long-term support level of 200-day simple moving average price, which indicates that prices could move up further from the current trading level.

Therefore, based on the above rationale, technical measures and valuation done using the above methodology, we have given a "Buy" recommendation at the current price of GBX 46.50 (as on September 20, 2019), based on the 1.94x NTM Company’s forecasted Price-to-Book Value per share multiple (approx.) on the FY19E Book value per share (approx.).
 
*All forecasted figures have been taken from the Thomson Reuters.
*Currency exchange rate (USD/GBP) = 0.81.

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