AVEVA Group Plc

AVEVA Group Plc (LON: AVV) is a Cambridge-headquartered engineering & industrial software Company, which creates industrial software that inspires people to shape a sustainable future.

The Company will release H1 FY2021 results on 5 November 2020.

Investment Highlights - AVEVA Group Plc – Buy at GBX 4,481.00

• In the six months, the Company delivered a substantial return of ~ 27.81% and delivered higher returns compared to the benchmark Index (FTSE-100 Index).
• Over the course of 4 years (FY16 – FY20), the company’s Operating Profit surged from GBP 29.42 million in FY16 to GBP 95.00 million in FY20, compounded at an annual growth rate (CAGR) of ~34.05 per cent.
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 24 level), which means the stock price could increase in the short term.

Key Risks

• The Company’s operational performance was impacted by the outbreak of covid-19 mayhem as it resulted in contract losses and delay in project delivery.
• The Company operates in multiple geographies, and profits can be impacted negatively due to foreign exchange rate fluctuations.

Recent News

On 12 October 2020, AVEVA Group provided an update on debt financing related to the proposed acquisition of OSIsoft. The Company successfully completed syndication of RCF (revolving credit facility) of £250 million with BNP Paribas, Barclays, J.P. Morgan, Santander and HSBC.

Update on Trading performance (H1 FY2020)

• Despite the disruption due to covid-19, the Company witnesses solid demand for software across multiple industries.
• The Company expects revenue to be around £333 million in H1 FY2021, remained in line with management expectations.
• The revenue declined by 7% on a constant currency basis, due to the early renewal of the Global Account contract.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company performed well in the first half of the financial year 2020, despite the challenges related to covid-19, and outlook for FY2020 remained unchanged. AVV experienced strong demand, particularly in cloud solutions and won multiple orders from different sectors. The Company has a strong order pipeline along with a higher volume of contract renewals. AVEVA expects solid revenue growth in the second half of the financial year 2021 and is confident towards the full-year outlook. The stock made a 52-week low and high of GBX 2,634.00 and GBX 5,364.00, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Buy” recommendation on AVEVA Group Plc at the current price of GBX 4,481.00 (as on 12 October 2020, before the market close at 11:52 AM GMT+1), with lower double-digit upside potential based on 48.50x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Tritax Big Box REIT Plc

Tritax Big Box REIT Plc (LON: BBOX) is an FTSE-250 listed real estate investment trust and is dedicated to large logistics warehouse assets (Big Boxes) on the UK.

Investment Highlights - Tritax Big Box REIT Plc – Expensive at GBX 165.07

• As per valuation metrics, EV/Sales and EV/EBITDA multiples of the Tritax Big Box Plc is currently higher as compared to the corresponding multiples of the Residential & Commercial REITs industry, reflecting overstretched valuations.
• The current ratio for the financial year 2019 stood at 0.36x, which is lower than the industry median of 1.03x, reflecting insufficient current assets to pay its short-term obligations. The current ratio is consistently declining since FY2014.
• From the technical standpoint, 14-day RSI is currently supporting downward movement (around 74 level), which means the stock price could decline in the short term.

Key Risks

• With the outbreak of covid-19, the Company is facing challenges related to the market backdrop.
• The Company could experience fluctuations in rent collection and portfolio value.

Recent News

On 12 October 2020, Tritax Big Box REIT declared an interim dividend of 1.5625 pence for the period from 1 July 2020 to 30 September 2020.

Update on trading performance for Q3 FY2020 (released on 12 October 2020)

• In the third quarter of FY2020, the Company witnessed the logistics market in the UK to strengthen, based on changing shopping habits with strong occupational activity.
• The Company remained focused on high-quality assets, reflected by strong rent collection levels for the period. The Company expects to collect 99% of Q4 FY2020 rent by November end.
• The Company’s strategy is based on direct and active management of the portfolio to deliver value for shareholders.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company experienced UK logistics market to further strengthen in the third quarter of the financial year 2020. The rent collection levels in Q3 remained strong, and the Company is expecting to collect 99% of Q4 FY2020 rent by November end. BBOX’s strategy is based on direct and active management of the portfolio to deliver value for shareholders. In long-run, the Company is well-positioned to manage the uncertain challenges based on growing development pipeline, asset management initiatives, increasing demand for logistics space and a high-quality portfolio. Presently, the company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of GBX 79.00 and GBX 165.30, respectively.

Based on the factors as highlighted above, we believe the stock of Tritax Big Box REIT Plc is “Expensive” at the current price of GBX 165.07 (as on 12 October 2020, before the market close at 2:00 PM GMT+1), with support from few catalysts needs to be evaluated at a later stage such as benefits of improved rent collection and strengthening of the UK logistics market. 

 

*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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