John Wood Group PLC

John Wood Group PLC is an FTSE 250 listed global leader in consulting, projects & operations solutions in energy and the built environment.

Investment Rationale for Valuation – WATCH at GBX 202.60

• Weak Profitability: On the profitability front, the EBITDA margin and the gross margin remained lower than the respective industry median of 11.2% and 26.7% during H1 FY21.
• Low Liquidity: The current ratio of 0.75x remained lower than the industry median of 1.20x during H1 FY21.
• Strong Industry Outlook: The US Congress had recently passed a USD 1 trillion infrastructure spending package boosting the industry prospects.
• Declining Top-line Business: WG’s top-line revenue witnessed a significant drop of around 22.9% during H1 FY21 when compared with the prior-year levels.
• Unfavourable Technical Indicator: From a technical standpoint, WOOD is hovering lower than the 20-days exponential moving average of GBX 214.25, indicating a correction in the stock price.

One Year Share Price Chart 

(Source: REFINITIV; Analysis done by Kalkine Group)

Conclusion

Based on the weak top-line business, lower profitability margins against the industry median and unfavorable technical indicators, we have given a “WATCH” recommendation on John Wood Group PLC at the current market price of GBX 202.60 (as on 09 November 2021 at 08:18 AM GMT) while we will suggest fresh buying after identifying fresh growth catalysts.

Argo Blockchain PLC

Argo Blockchain PLC (LON: ARB) is a Cryptocurrency Mining Company, which is listed on the Main Market of the London Stock Exchange.

Investment Rationale – HOLD at GBX 136.50

• Margin Growth: Argo generated BTC mining margin of 86% in the month of October 2021, against 84% in September 2021.
• Strong Pricing Environment: Bitcoin prices were hovering near-week high and topped over US$66,000 level. The approval of a Bitcoin ETF has been a major milestone for getting Bitcoin accepted as a mainstream financial asset.
• Additional Listing: On 27 September 2021, ARB announced the closing of its offering for an aggregate of 8,525,000 American Depositary Shares, and raised nearly US$127,875,000, before deducting underwriting discounts and commissions.
• Better Profitability: In H1 FY21, ARB reported a better EBITDA margin and net margin than the industry median of 29.0% and 9.9%, respectively.

Key Risks

• Altcoins: The pumping in altcoins can put pressure over BTC as well.
• Environmental Concern: Rising energy pressure can cap the BTC’s prices rally. Meanwhile, ARB’s mining profit margin has shown a slight decline in September 2021 against August 2021.
• Macroeconomic Risk: The spike in US Treasury Yield can keep the Bitcoin prices under pressure. Moreover, increase in interest rates sooner than expected can curtail the growth.

Recent News

Expansion of Mining Capacity: On 30 September 2021, ARB purchased 20,000 Bitmain Antminer S19J Pro machines, which is expected to increase the Argo's hashrate by over 2 Exahash.

October Operational Update (as on 08 November 2021)

 (Source: Company Website)

• Operations: ARB mined 167 BTC in October 2021, against 165 BTC in September 2021.
• Total BTC Count: At the end of October 2021, ARB owned 2,218 BTC (Bitcoin or Bitcoin Equivalent).
• Revenue: It generated a mining revenue of £7.24 million in October 2021 (September 2021: £5.50 million).

Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

Conclusion

During Q3 FY21, ARB generated a record revenue of US$26.0 million (£19.3 million) with net income of US$17.3 million. It mined 597 BTC in Q3 FY21 and completed its ADR listing on Nasdaq. Moreover, the construction of Helios mining facility in Dickens County is also underway to scale up the capacity. On 10 September 2021, ARB entered a Bitcoin-backed loan agreement for £18.05 million with a maturity date of 29 October 2021. The proceeds will be used for building the West Texas data centre and support operating cash flow requirements. ARB also expects to have a record profit growth in FY21.

Furthermore, the Company has shown its commitment to reducing environmental impact and tackling the crucial sustainability issues well. The stock made a 52-week High and Low of GBX 340.53 and GBX 6.40, respectively.

Based on the financial growth, favorable BTC prices, recent fundraisings, climate positive strategy, supported by the valuation conducted above, we have given a “HOLD” recommendation on Argo Blockchain PLC at the current market price of around GBX 136.50 (as on 9 November 2021 at 08:14 AM GMT).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from REFINITIV.

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