TP ICAP Plc - Posted Resilient Performance and Remain Cautious

TP ICAP PLC (LON: TCAP) is FTSE 250 listed Company, which act as a professional intermediary to bring together the sellers and buyers in global energy, financial, and commodities markets. It provides services related to broking, market intelligence and data & analytics.

Financial Highlights (H1 FY2020)

(Source: Company Website)
On 7 August 2020, the Company provided a financial and interim management report for the six months ended 30 June 2020. In H1 FY20, the Group’s revenue increased by 7% year-on-year to £990 million (H1 FY19: £922 million) on a reported basis, while it also increased by 6% on a constant currency basis against the same period last year. Revenues were uplifted by a strong month in March 2020. Statutory operating profit for H1 FY20 decreased by 6% year-on-year to £101 million, with an operating profit margin of 10.2% (H1 FY19: 11.6%) and statutory profit before tax of £78 million (which was £5 million lower in H1 2019). The decline in statutory profit was primarily driven by higher business reorganisation expense and the £10 million impact (due to a surge in unused annual leave as at 30 June 2020). While the underlying operating profit increased by 1% year-on-year to £159 million on a reported basis. The Board has declared an interim dividend of 5.6 pence per share.

Share Price Performance

1-Year Chart as of 10 August 2020, after the market close (Source: Refinitiv, Thomson Reuters)
TP ICAP shares were closed at GBX 302.60 on 10 August 2020, down by 2.39% against the last day closing price. Stock 52 week High and Low were GBX 425.00 and GBX 160.25, respectively.
From the technical standpoint, the shares were trading below the short-term support level of 50-day simple moving average prices, which reflects a downward trend in the stock.

Key Risks
The Group is exposed to the risk of a fundamental change to the regulatory framework, which has a material adverse impact on the business and economic model.There is a risk that the Group suffers loss as a result of a movement in foreign exchange rates, whether through transaction risk or translation risk. Moreover, the Covid-19 mayhem and macroeconomic uncertainties will keep the market volatile in the short term.

Conclusion
In July 2020, the trading activity witnessed a decrease in the performance and was materially lower than 2019 levels. In the financial year 2020, the revenue expects a low single-digit growth. The Company will continue to monitor the impact of the coronavirus pandemic on the customers through the remainder of the year. Moreover, the Group’s objective is to invest approximately £15 million of cash in 2020. The Group stays cautious as economic uncertainty continues. Presently, the Company is trading near the 52-week mid, raising doubts at the significant upside potential at the current price level.
Based on the valuation and factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the closing market price of GBX 302.60 (as on 10 August 2020) with support from few catalysts needs to be evaluated at a later stage.
 

TBC Bank Group Plc – Operating with Strong Liquidity and Capital Positions

FTSE 250-listed TBC Bank Group Plc (LON: TBCG) is a Tbilisi, Georgia-based Banking Company, which provides leasing, banking, brokerage, and card processing services to individual and corporate customers.
On 18 August 2020, the Group will announce the consolidated financial results for the second quarter and first half of 2020.

Recent News
On 27 July 2020, the Company announced the appointment of Abhijit Akerkar as an Independent Non-Executive Director, effective immediately.

Trading Update (as on 20 May 2020)
The Company revealed the Q1 FY2020 results, with a decline in the profit due to a large COVID-19 related loan impairment charge. The Group stayed on track to achieve the medium-term financial targets. The net interest income surged by 3.4% year-on-year to GEL 208.0 million in Q1 FY20, while fee & commissions surged by 4.2% year-on-year to GEL 43.6 million.The Group reported the profit for the period (without COVID-19 impact) stood at GEL 152.4 million as against GEL 133.3 million in Q1 FY19. Further, the cost to income for the Group decreases to 36.5% in Q1 FY20 (Q1 FY19: 37.7%).

Share Price Performance
 
1-Year Chart as of 10 August 2020, after the market close (Source: Refinitiv, Thomson Reuters)

TBC Bank Group Plc’s shares were closed at GBX 826.00 on 10 August 2020, up by 3.51% against the last day closing price. Stock 52 week High and Low were GBX 1,414.00 and GBX 635.00, respectively.
From the technical standpoint, shares were trading slightly above the short-term support level of 50-day simple moving average price, which reflects an uptrend in the stock and carrying the potential to move up further.

Key Risks
The Georgian economy and the business may be adversely affected by regional tensions and instability.The rising COVID-19 cases and U.S.-China tensions dented sentiment may also impact the business growth trajectory in the near term. During an economic slowdown, expansion plans in the country would stop due to limited demand for new loans. The Company’s performance is significantly exposed to the volatility in the capital and forex market.

Valuation Methodology


Conclusion
The Company announced on 2 July 2020 that it had become a member of the FTSE4Good Index Series. TBCG has reiterated the guidance for return on equity to above 20%, the cost to income to fall below 35%, loan book growth of around 10% to 15%, in the medium term. The Group continues to operate with a strong capital base and a robust liquidity position. However, the Company and industry may be impacted by COVID-19 mayhem in the near term. Also, the Group had decided not to propose dividends in order to preserve capital.  Meanwhile, the Group is developing customer-focused digital ecosystems, along with enhancing the value proposition beyond the financial service. Overall, the Company is on track to deliver superior results and to attain sustainable growth for the shareholders.
According to the banking industry, the Bank of England’s quarterly monetary policy report presented a surprisingly cheaper assessment for the UK to recover from the COVID-19 pandemic lockdown. Most of the banks have given the pessimistic outlook for the UK in the near term. The industry expects a loan loss caused by the coronavirus lockdown and the subsequent economic damage.
Over the course of 4 years (FY15 - FY19), the Company’s revenue surged from GEL 762.90 million in FY15 to GEL 1,797.03 million in FY19. Compounded annual growth rate (CAGR) stood at 23.89%.
Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing market price of GBX 826 (as on 10 August 2020) and will recommend fresh buying at the right time.
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.
*Dividend Yield may vary as per the stock price movement.

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