JPMorgan European Investment Trust Plc - Facing Unprecedented Challenges

JPMorgan European Investment Trust Plc (LON: JETI) is a FTSE All-Share listed Investment Trust Company. It has approximately two share classes, which comprise Growth and Income.

Top Ten Companies in Growth Portfolio (as on 31 July 2020): Nestle (6.3%), Roche Holdings (4.4%), JPMorgan European Smaller Companies Trust (3.7%), Novartis (3.1%), Novo Nordisk (2.6%), SAP (2.6%), ASML (2.5%), Schneider Electric (2.4%), Allianz (2.2%), and Sanofi (2.0%).

Top Ten Companies in Income Portfolio (as on 31 July 2020):Nestle (5.4%), Roche Holdings (3.9%), Novartis (2.9%), Sanofi (2.3%), Novo Nordisk (2.2%), Allianz (1.8%), Siemens (1.7%), Iberdrola (1.7%), ENEL (1.6%), and Total (1.6%).

Recent News

On 17 August 2020, the Company announced the indicative gearing ratio of the business. The gearing ratio of growth and income portfolio (as of 14 August 2020) stood at 1.5% and 2.2%, respectively.

On 17 August 2020, the Company announced the unaudited net asset value (NAV). The NAV of growth and income portfolio (as of 14 August 2020) stood at 321.5 pence per share and 139.6 pence per share, respectively.

Financial Highlights (FY2020)

On 15 June 2020, the Company provided a final result for the year ended 31 March 2020. JETI generated a total return on net assetsfor the Company's Growth shares of negative 16.3% after reinvesting dividends. While the total return to shareholders for the Company's Income shares was negative 27.5%. As on 31 March 2020, JETI had net assets of £317 million for both share classes (growth and income).The Benchmark return for both share classes (growth and income) is the MSCI Europe ex UK Index in sterling terms, and for the year under review, this was negative 8.3%.

Share Price Performance Analysis


 1-Year Chart as of 18 August 2020, before the market close (Source: Refinitiv, Thomson Reuters)

JPMorgan European Investment Trust Plc’s shares were trading at GBX 119.50 on 18 August 2020 (before the market close at 9:32 AM GMT+1), up by 4.82% against the last day closing price. Stock 52 week High and Low were GBX 166.00 and GBX 78.80, respectively.

From the technical standpoint, 14-day RSI is currently moving towards the overbought zone, which means there is a potential for a short-term correction in the stock price.

Key Risks

The second wave of COVID-19 outbreak and a potential slowdown in the British economy, jobs cuts and shrink in the business activities can hit hard to the investment trust companies. Further, uncertainties surrounding the Brexit is posing another risk on the UK investment trust sector. Also, the Covid-19 pandemic has created a challenging market backdrop, and the Company can face fluctuation in rent collection and portfolio value. Furthermore, the usage of floating-rate debt exposes the business to underlying interest rate movements.

Conclusion

JETI stated that the economic uncertainty due to the pandemic had a negative impact on the markets and worsened the energy demand. The Company would seek the opportunity to make a decent quality investment. A major concern for the investment trust companies remains the Brexit and the COVID-19, which can move the market either way. JETI is emphatically optimistic about the underlying and aggregate progress of the portfolio. In the short-term, the portfolio remains challenging (due to COVID-19 pandemic), but once crisis stables, the performance will give a decent return for shareholders. Moreover, the Company’s stock is trading near a 52-week mid, raising doubts at the upside potential at the current price level.

Based on the above rationale, we have given a “Watch” stance on JPMorgan European Investment Trust at the current market price of GBX 119.50 (as on 18 August 2020, before the market close at 9:32 AM GMT+1), while we will look when full flashed market recovers from COVID-19 or Brexit.

Foxtons Group Plc - Resilient Performance within the Context of the Market

FTSE All-Share listed Foxtons Group Plc (LON: FOXT) is one of the estate agencies based in London, UK. The major area of operations is Sales, Lettings, and Mortgage broking.

In October, the Company will announce the Q3 trading update.

Financial Highlights (H1 FY2020)


(Source: Company Website)

On 28 July 2020, the Company provided a financial result for the half-year ended 30 June 2020. The Company has reported revenue of £40.4 million, a decrease of 22% as compared to £51.8 million in H1 FY19. The lower revenues of £11.4 million were largely covered by a £10.0 million reduction in operating costs. Of the total revenue, lettings revenue stood at £25.7 million, sales revenue was £11.1 million, and Mortgage broking revenue stood at £3.6 million.The adjusted operating loss stood at £2.4 million (H1 FY19: £0.9 million) in the first half of 2020 as reductions in the Company's cost base largely offset the reductions in revenue.The Company witnessed a strong financial position with a net cash balance of £40.5 million at 30 June 2020.

Share Price Performance

 
1-Year Chart as of 18 August 2020, before the market close (Source: Refinitiv, Thomson Reuters)

Foxtons Group Plc’s shares were trading at GBX 39.80 on 18 August 2020 (before the market close at 9:40 AM GMT+1), up by 3.65% against the last day closing price. Stock 52 week High and Low were GBX 98.00 and GBX 27.00, respectively.

From the technical standpoint, 14-day RSI is currently moving towards the overbought zone, which means there is a potential for a short-term correction in the stock price.

Key Risks

The Company's performance has been significantly wedged by Covid-19 outbreak. Further, the pandemic has introduced additional uncertainty to the future market outlook and continues to impact the operations of the Group. Before the COVID-19 outbreak, the Company’s performance is exposed from the prolonged downturn in the London sales market and the low transaction levels experienced in 2019.Foxtons operates in a highly competitive marketplace, which can affect the Company’s performance.

Conclusion

From 1 June 2020, the Company has seen steady improvement in activity across key areas of the business (due to the re-opening the branches), with a good recovery in lettings applicant numbers, listings and commission, and a strong sales commission pipeline since re-opening. Also, the Government has supported in Stamp Duty relief (effective from 8 July 2020), which gives an increase in short term future sales activity. The Company remain cautious about the impact Covid-19 will have on letting’s markets and London residential sales in the months to come, but it is well-prepared to deal with any further Covid-19 restrictions.

Based on the above rationale, we have given a “Watch” stance on Foxtons Group at the current market price of GBX 39.80 (as on 18 August 2020, before the market close at 9.40 AM GMT+1), while we will look when signs of a recovery seen from the prolonged downturn in London.
 
*Dividend Yield may vary as per the stock price movement.

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