United Utilities Group PLC

United Utilities Group PLC (LON: UU.) manages electricity distribution, water distribution and wastewater network in the North West region of England. It is also engaged in generating renewable energy, corporate fiduciary, provide funding, and management of the property. It serves households and business customers of about three million and 200,000 respectively.

On 22^nd May 2020, the group will announce its full-year results for the year ending 31 March 2020.

Trading Update – as on 25^th March 2020
 The group affirmed that that current trading is in line with the group's expectations for the year ending 31 March 2020. The group has shown confidence in its ability to manage the financial shock arising through Covid-19 crisis due to its robust liquidity position and fixed revenue under the regulatory revenue control for the next five years. The company expect its full-year net debt to RCV (regulatory capital value) to be in the range of 55% to 65% in FY20 while the Company is expecting its revenue to be higher than last year, mainly reflecting its allowed regulatory revenue changes. Consequently, the Underlying operating profit for FY20 is likely to be higher than FY19.

Share Price Performance
 
Daily Chart as of March 27^th, 2020, after the market closed (Source: Thomson Reuters)

United Utilities Group’s shares closed trading session at GBX 898 on 27^th March 2020 and was up by 0.94% versus the previous day closing price. Stock's 52 weeks High is GBX 1,068.50 and Low is GBX 743.00.

Valuation Methodology
 

 
Key Risks
 
The profitability is likely to get affected by accelerated depreciation charge pertinent to Bioresources assets. The Potential change in the political environment and regulatory frameworks, failure to meet all legal and regulatory obligations and responsibilities, failure to provide a secure supply of clean, safe drinking water and threat of public confidence in water supply, failure to remove and treat wastewater, and inability to provide appropriate resources (human, technological or physical resource) required to support business activity.
 
Conclusion
 
As per latest trading update, Company’s revenue and profitability is likely to be higher in FY20, as against FY19. However, the underlying net finance expense of the company is expected to be £15 million higher than in FY20 than FY19, due to the higher RPI inflation and the impact of new debt and interest rate swaps. The higher RPI inflation charge compared with previous year contributed to the group's average underlying interest rate of 4.0 per cent being higher than the rate of 3.8 per cent for the six months ended 30 September 2018. Dry weather event could affect the revenue of the company. Any increase in restructuring costs could impact the profitability of the company. The company operations are likely to get affected negatively due to uncertainty created by the Brexit as it will result in uncertain political and economic climate for short to medium term.
 
Based on the headwinds and factors highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 898.00 (as on 27^th March 2020), with support from new catalysts to be evaluated at a later stage.  
 

Hikma Pharmaceuticals PLC

Hikma Pharmaceuticals PLC (LON: HIK) is the United Kingdom-based pharmaceuticals and biotechnology company, specializes in the business of developing, manufacturing, and marketing of a portfolio of branded and non-branded generic medicines. The group has more than 650 products in about 50 countries.

On 30^th April 2020, the group will announce its trading update for Q1 FY20.

Recent News
On 13^th March 2020, Hikma had launched the Everolimus Tablets and thus expanded its portfolio for generic pharmaceutical division. 

Financial Highlights, FY219 – for the year ended on 31^st December 2019, (USD Million)
 
(Source: Financial Information, Company Website)

During the fiscal year 2019, the group has remained competitive and delivered robust financial performance. The group revenue surged 7% to USD 2,207 million in FY19 while the core operating profit stood higher by 10% in FY19 than FY18. Also, the core basic earnings per share surged 9% in FY19 compared to FY18. Thus, the group has recommended a 16% rise in the total dividend for FY19 to 44 cents per share (approximately 34 pence per share), higher from 38 cents per share (about 29 pence per share) in FY18.

Share Price Performance
 
Daily Chart as of March 27^th, 2020, after the market closed (Source: Thomson Reuters)

Hikma Pharmaceuticals Plc shares closed trading session at GBX 1,964 on 27^th March 2020 and was up by 5.14% versus the previous day closing price. Stock's 52 weeks High is GBX 2,212.00 and Low is GBX 1,553.00.\

Growth Drivers 
Looking ahead, the group is in decent position to generate long-term sustainable growth while
over the past ten years, the group has delivered a total shareholder return of 345%, surpassing the FTSE 100 and the FTSE Pharmaceutical total shareholder returns of 104% and 206% respectively.
 
Conclusion 
Hikma Pharmaceuticals PLC is expecting injectables revenue to surge in 2020 while margin to be in between 35% to 37%. On the other hand, the group expect Generics revenue to be in the range of USD 700 - 750 million and core operating margin to be ~20%.
 
The Group has a diversified product portfolio with a significant presence in the United States, MENA, Europe and the United Kingdom. There has been a strong demand for its existing as well as newly launched products in the market.
 
The Group do not see any material impact due to the ongoing outbreak of coronavirus disease. Moreover, they do not have major operations or manufacturing in China. Likewise, due to minor footprint in the UK and limited dependence on movement between the UK and Europe, there are not much impacted by Brexit either.
 
Over the past four years, the company’s revenue has grown from $1,440 million in FY 2015 to $2,207 million in FY 2019, delivering growth of 11.27 per cent on CAGR basis.
 
Based on the fundamental performance, we recommend investors to keep a “HOLD” on the stock at the closing price of GBX 1,964.00 (as on 27^th March 2020).  
 
 
*All forecasted figures and Peers information has been taken from Thomson Reuters.

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