PHAROS ENERGY PLC

Pharos Energy PLC (LON: PHAR) is an FTSE-All share listed independent Oil & Gas Producers company. The company has exploration, production and development interests in the region of Vietnam and Egypt. It was listed on the London Stock Exchange in 1997.

The group will announce the interim results on 19^th August 2020.

Recent News
On 11^th March 2020, the group has announced the appointment of Lisa Mitchell to the position of Independent Non-Executive Director, with effect from 1^st April 2020.

Preliminary Results for the financial year ended 31^st December 2019 (as on 11^th March 2020 – USD Million)
 
(Source: Company Website)

During the year 2019, the group has completed the acquisition El Fayum Concession in Egypt and reported the Group revenue of $189.7m as against $175.1m in FY2018. While the loss of the year from continuing operations stood at $26.5m in FY2019 versus a profit of $24.1m in FY2018. The cash generated by operations was $113.0m in FY2019 (FY2018: $101.4m). The group reported the cash balance and net debt of $58.5m and $41.5m, respectively as at 31 December 2019. The group is expecting the capital expenditure for FY2020 to be around $45m, along with $10m of discretionary spend for Egypt.

Share Price Performance  
 
Daily Chart as on 6^thApril 2020, after the market closed (Source: Thomson Reuters)

Pharos Energy PLC’s shares closed at GBX 14.92 on 6th April 2020, up by 26.44% per cent against the last day closing price. Stock’s 52 weeks High and Low are GBX 78.00/GBX 10.00. 

Valuation Methodology
 

*Peers: Wentworth Resource PLC, Genel Energy PLC, Premier Oil PLC, Cadogan Petroleum PLC and Volga Gas PLC

*1 USD = 0.812509 GBP

Conclusion
During the financial year 2019, the group revenue surged whereas reported loss for the year as against profit in FY2018. Hence, the company has shown a decline in financial performance in the financial year 2019. Both the top-line and the bottom-line performance have declined, while the profitability remained in the negative zone for the period. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors.

Due to the global macroeconomic scenario, Egypt operation has been suspended while the scale of discretionary work is under review. The board has also postponed the dividend payment until the crisis gets subside. In the wake of Covid-19, the dampened energy demand has impacted the oil prices, and subsequently, their revenue and profitability are likely to get impacted in future.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 14.92 (as on 6th April 2020), while we look for any upcoming catalysts in the near term.
 

Angling Direct PLC

Angling Direct PLC (LON: ANG) is a general retailer’s company, which is engaged in the business of fishing tackle and sells its products through an online portal and retail stores. The group’s product portfolio includes bivvies and shelters, rods, bait and additives, terminal tackle and reels.

Trading and Operational Update
On 6^th April 2020, Angling Direct released an update related to trading and operational performance post-Covid-19 impact. The group’s trading in February remained resilient with an increase in sales by 23.3 per cent, and in-store sales increased by 1.3 per cent on a like-for-like basis. The sales from e-commerce business increased by 3.5 per cent, driven by an increase of 9.1 per cent from the UK business, while e-commerce sales from international business declined by 27.6 per cent. The decline in the International e-commerce sales was due to strategic decision taken to withdraw from some territories in order to protect profitability and margins in last Autumn. The sales increased by 19 per cent in the first 3 months of March before the impact of coronavirus. The group remained focused on ensuring the health and safety of its employees and customers and has taken multiple measures to keep people safe and make arrangements for office-based employees so that they can work from home. The group on 24^th March 2020, temporarily closed its stores as per Government policy. The group’s web stores remained open and witnessed strong trading in the UK and international markets. The group report strong e-commerce sales with strong customer demand. The board have been taking multiple steps to improve cash flow, preserve capital, holding investment plans and reducing the fixed costs. The company has a short-term credit facility of GBP 2.5 million from NatWest and is also exploring all available options. The group expect its revenue from FY2021 to decline and profitability to reduce, due to store closures. The board is unable to quantify the impact of the outbreak at present and has withdrawn its current market guidance.

 Share Price Performance

Daily Chart as of April6^th, 2020, after the market close (Source: Thomson Reuters)

Angling Direct PLC’s shares closed at GBX 28.50 on 6^th April 2020, down by 8.06% against the last day closing price. Stock's 52 weeks High is GBX 86.96 and Low is GBX 25.03.

Conclusion
The group has shown resilience in the operating and financial performance prior to the outbreak of Covid-19. The group’s sales have been increasing with strong consumer demand in the month of February and the first three weeks of March.The group’soperations are impacted after the group decided to close its retail stores as per the instructions of the UK government and expect a decline in the revenue and profitability in the financial year 2021. The group stillable to operate its online business and has recorded a strong demand post-Covid-19 outbreak from both UK and International markets. The group has taken required steps to tackle the uncertain situation and is exploring all available options to meet its working capital requirements and is also looking to take advantage of policies introduced by the Government of UK to support businesses.
Therefore, based on the above rationale and uncertainties in near-term due to Covid-19 pandemic, we have given a “Watch” recommendation at the closing price of GBX 28.50 (as on 6^th April 2020), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures and peers information has been taken from Thomson Reuters.

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