Royal Dutch Shell PLC

Royal Dutch Shell PLC is an FTSE 100 listed Petrochemical and Energy Company that is involved in the exploring, producing, refining, and marketing of oil and natural gas.

On February 3, 2022, RDSA will release Q4 FY21 results.

The Company had paid a quarterly interim dividend of 24 US cents per share on 20 December 2021, while the ex-dividend date was 11 November 2021.

Investment Rationale – Expensive at GBX 1,808.80

• Weak profitability: RDSA’s net margin fell in the negative zone during Q3 FY21, while the industry median was positive.
• Reduction in Production Volumes: RDSA had shown a significant reduction in production volume available for sale during Q3 FY21 when compared with Q2 FY21.
• Trading near 52 Weeks High: The Company’s stock is trading very close to the 52-week high. Thus, it may face retracement from the overstretched levels.
• Unfavourable Technical Indicators: From a technical standpoint, the stock price is hovering around the upper Bollinger band, indicating an overbought scenario. Furthermore, the 14-days RSI of ~71.51 reflects a bearish price momentum.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Conclusion

Based on the overstretched valuations and unfavourable technical indicators, we have given an “Expensive” recommendation on Royal Dutch Shell PLC at the current market price of GBX 1,808.80 (as of 13 January 2022 at 11:41 AM GMT). However, for any profit booking scenario, buy and holding levels should be looked at as per the risk appetite of investors.

AO World PLC

AO World PLC (LON: AO.) is an FTSE All Share index listed electrical retailer, which sells small and major domestic appliances and consumer electronics.

Rationale for Valuation – WATCH at GBX 104.70

• Sizeable Correction in Stock Price: The stock price plunged almost 74.12% on a one-year basis.
• Weak Revenue Guidance: The Company had anticipated FY22 revenue growth to be flat to negative 5% year on year.
• Increase in Net Debt: The net debt increased from £28.1 million as of 31 March 2021 to £102.2 million as of 30 September 2021.
• Operational Challenges: The Company had warned of shortages of electrical products and delivery drivers.
• Unfavourable Technical Indicators: From a technical standpoint, the stock price is hovering between the middle Bollinger band and the upper Bollinger band, indicating a bearish price momentum.

One Year Share Price Chart

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

Conclusion

Considering the profit warning, shortage of products, and stock price correction, we have given a “WATCH” recommendation on AO World PLC at the current market price of GBX 104.70 (as of 13 January 2022 at 12:43 PM GMT). However, for any profit booking scenario, buy and holding levels should be looked at as per the risk appetite of investors.

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

*Dividend Yield may vary as per the stock price movement.

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