Compass Group Plc (LON: CPG)

Business Overview
Compass Group Plc is a Chertsey, United Kingdom-headquartered consumer support services company. Its areas of operations are divided into segments like North America, Europe, Rest of the world and Central activities.

Recent News
On 6^th December 2019, the company announced that its Chairman, Paul Walsh, has decided to step down as Chairman and Director of the Company. The company would now be looking for his successor, until then he would remain as Chairman. Senior Independent Director, John Bason, would now lead the search.

Financial Highlights - Financial year 2019 (30^th September 2019, GBP)

(Source: Interim Report, Company Website)

In the financial year 2019, the company’s underlying revenue increased by 6.4 per cent to GBP 25.15 billion as compared to GBP 23.80 billion in FY2018, while statutory revenue surged by 8.8 per cent to GBP 24.88 billion. The increase in revenue was driven by the good performance in North America with a wide-based organic revenue increase of 7.7 per cent. The underlying operating profit increased to GBP 1.88 billion, i.e. 4.7 per cent as compared to GBP 1.8 billion in the fiscal year 2018 while the Statutory operating profit reduced by 5.4 per cent due to the impact of the cost action programme offset by foreign exchange benefit and higher gains. For the year ended 30 September 2019, the operating margin was reported at 7.4 per cent. The underlying earnings per share for the company grew by 6 per cent to 85.2p as compared to 80.4p in FY2018 while the statutory earnings per share witnessed a decrease of 1.8 per cent to 70p as against 71.3p in FY2018. For the current period, the net debt to EBITDA ratio was 1.3x. The annual dividend per share was 40 pence, an increase of 6.1% from the previous year.

Share Price Performance

Daily Chart as on 9^thJanuary 2020, before the market closed (Source: Thomson Reuters)

On January 9^th, 2020, Compass Group Plc shares were trading at GBX 1,905.9 at the time of writing before the market close (at 8:02 AM GMT), up by 0.45 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 2,150/GBX 1,575.50. The stock price has given 15.17 per cent returns during the previous year. In the last three months and one month, the stock price has given negative 6.17 per cent returns and 4.12 per cent returns respectively.

Conclusion
The company has witnessed a decent financial performance in the fiscal year 2019. The steady growth is getting offset with an increased mobilisation cost and inflation prevailing in the UK and European markets. There are some principal risks and uncertainties which could impact the overall business of the company. Health and safety are very important in the food business, any discrepancies in that could affect the revenue and hamper the reputation of the company. Increase in the cost inflation could affect the profitability of the company. However, for 2020, the company expects organic growth around the mid-point of the 4%-6% range while maintaining a robust margin. The company’s outlook stays strong. The pipeline of new contracts in North America is strong and Rest of World is growing well, the company is excited about the significant structural growth opportunities globally. The prospectus of the company looks good and it could provide an opportunity to invest for the long term.

The company’s gross profit has grown from GBP 13,863 million in FY2016 to GBP 17,787 million in FY2019, giving approximately 8.66 per cent growth on a CAGR basis.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 1,897.50 (as on 8th January 2020).

NMC Health Plc (LON: NMC)

Business Overview
NMC Health Plc is the largest private healthcare company in the U.A.E. (United Arab Emirates). The company provides healthcare services internationally with the UAE and Spain being the major markets.

Recent News
On 8^th January 2020, the company announced that Mr Al Qebaisi and Mr Al Muhairi have reduced their outstanding indebtedness under borrowings raised by Nov Partners Investment Limited. This was done through the completion of the two transactions. 31.2 million existing ordinary shares of NMC Health Plc representing approximately 15 per cent of NMC Health's issued and outstanding share capital at £12 per share, raising gross proceeds of approx. US$493 million and 40.5 million existing ordinary shares of Finablr PLC ("Finablr") representing approximately 6 per cent of Finablr's issued and outstanding share capital at £1.35 per share, raising gross proceeds of approx. US$72 million.

Capital Markets Day Update
On 21st October 2019, NMC Health informed that its H2 FY2019 business performance is performing well and expected H2 guidance to be even stronger than H1 FY2019 and restated full-year guidance. The company’s strategy is offering a substantial advantage in all the main markets in which it operates. The company expected double-digit growth in top-line and the bottom-line performance in FY2020. In the financial year 2019, the company’s top line is expected in the range of US$2,500-US$2,540 million at Post-IFRS 16 and Pre-IFRS 16 basis. The net income to equity holders for the financial year 2019 expected to be in the range of US$297-US$305 million at Post-IFRS 16 (US$320-US$330 million at Pre-IFRS 16 basis). The net debt to EBITDA would be below 3.4 times in the financial year 2019. The company is expecting robust double-digit organic revenue and EBITDA growth in FY2020. The aforementioned facilities are anticipated to contribute towards the revenue of US$45-US$55 million in 2020 and, as a result of being in the initial ramp-up phase, it estimated a US$18-20 million of loss at the EBITDA level from new projects (post-IFRS 16) in 2020. Growth capex is expected at US$90-US$100 million, while maintenance capex is expected to be around 3 per cent of revenues for the year.

Share Price Performance

Daily Chart as on 9^thJanuary 2020, before the market closed (Source: Thomson Reuters)

On January 9^th, 2020, NMC Health Plc shares were trading at GBX 1,298 at the time of writing before the market close (at 9:31 AM GMT), up by 3.22 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 3,059/GBX 1,192.

Conclusion
The company said that they would report a favourable performance in the second half of the financial year 2019. Consequently, the financial year 2020 is expected to deliver double-digit growth in the top line and bottom line. The company’s management is expected to open four new hospitals: two in Oman and two in the UAE. These facilities will improve the total capacity of up to 380 beds. At the end of 2019, the company has opened a ten-bed cosmetics hospital in Dubai.

The company is expected to reduce the debt in H2 FY2019. NMC Health is also in the process of achieving regulatory approvals for up to US$200 million, and opportunistic buy-back program announced previously this year.

The company’s total revenue has grown from USD 880.90 million in FY2015 to USD 2,057.3 million in FY2018, giving approximately 32.70 per cent growth on a CAGR basis.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 1,257.50 (as on 8th January 2020, after the market close).

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