Balfour Beauty PLC

Balfour Beatty Plc (LON: BBY) is a London, United Kingdom-based provider of infrastructure solutions related to management services, maintenance and upgrade in road and rail, utility infrastructure and power transmission.

On 14^th May 2020, the company will release its Trading Update.

Financial highlights for the year ended 31^st December 2019

(Source: Full Year Results, Company Website)

The underlying revenue for the financial year increased by 8% (up 5% at CER) at £8,405 million(2018: £7,802 million). Group underlying profit from operations was £221 million, an increase of 8% from the previous year. On 31^st December 2019, the net cash was reported at £512 million. Order book of the company surged by 13% to £14.3 billion(2018: £12.6 billion). Investments portfolio reduced to £1.1 billion (2018: £1.2 billion) and US military housing valuation decreased by £79 million. The Board has proposed a final dividend per share of 4.3 pence, giving a total proposed dividend per share for 2019 of 6.4 pence (2018: 4.8 pence).

Share Price Performance

Daily Chart as at March-12-20, before the market closed (Source: Thomson Reuters)

Balfour Beatty PLC shares were trading at GBX 243.80 before the market close (at 9:10 AM GMT) on 12th March 2020 and were down by 7.86% versus the previous day closing price. Stock 52 weeks High and Low are GBX 296.94 /GBX 192.30.  The group’s stock is reflecting the lower volatility as against the benchmark index, based on the company’s beta of 0.36.

Valuation Methodology

Bearish Technical Indicator
At the current trading level, shares were trading below its long-term crucial support level of 20-day and 50-day Simple moving average price, and prices could fall further from the current trading level.

From the price-performance standpoint, its shares have delivered a negative return of approximately 6.89% on a year to date basis and losses of around 12.45% recorded in the past one-month period.

Key Risks
The nature of the uncertainties and principal risks which could adversely impact the company’s profitability and ability to achieve its strategic objectives include: strategic risks which may arise as the Group moves into new territories and expands through acquisitions; operational risks arising from work winning, project delivery, joint ventures, supply chain, data security, cybercrime, health and safety and sustainability matters; external risks arising from the effects of national or market trends and political change and the complex and evolving legal and regulatory environments in which the Group operates; and organisation and management risks including business conduct and people-related risks.

Conclusion
The company is ongoing to pay down borrowingswith £112 million of preference shares to be repaid in July 2020 and US$46 million of US private placement notes repaid in early March 2020. Further, the Board will review the group’s capital structure once there is a clearer understanding of the coronavirus (COVID-19) situation.While COVID-19 continues to evolve, the company is monitoring developments closely, looking to mitigate the risk that it might have on the employees, clients and supply chain. With the failure to manage financial resources properly and forecast material exposures, the company might encounter financial risks. However, it is too early to fully evaluate any impact of the outbreak on the financial and operational performance of the Group.

From the technical perspective, at the current trading level, the stock was trading quite below its short-term crucial support level, a bearish technical indicator which reflects prices could move down from the current trading level. Moreover, the company is trading near its 52-week mid, raising doubts at the upside potential at current prices.

Based on the above risks as aligned with the company’s operations, we have given a "WATCH" recommendation at the closing price of GBX 264.60 (as on 11^th March 2020) with support from few catalysts needs to be evaluated at a later stage.

Funding Circle Holdings PLC

Funding Circle Holdings PLC (LON: FCH) is a leading international SME loan platform. The company assists SMEs to access finance that allows them to expand and grow by combining sophisticated data analytics, dedicated customer service, and cutting-edge technology.

Uncertain Economic Outlook and Reduced Growth for the Year Ended 31^st December 2019
Despite a challenging economic environment, the company’s revenue increased by 18% to £167.4 million in 2019(2018: £141.9 million). The adjusted EBITDA of negative £27.5 million (2018: negative £23.4 million) with a 16% loss margin (2018: 16%). The basic loss per share for 2019 increased by 24.4 pence as compared with the loss of 18.2 pence in 2018. In FY19, the free cash outflow stood at£49.4 million(2018 outflow: £40.9 million). Including a mix of short- and long-term investments and cash, the net assets stood at £319 million in FY19 (2018: £401.0 million).

Share Price Performance

Daily Chart as at March-12-20, before the market closed (Source: Thomson Reuters)

Funding Circle Holdings PLC shares were trading at GBX 58 before the market close (at 8:15 AM GMT) on 12th March 2020 and were down by 4.13% versus the previous day closing price. Stock 52 weeks High and Low are GBX 410 /GBX 48. 

Bearish Technical Indicator
At the current trading level, shares were trading below its long-term crucial support level of 20-day and 50-day Simple moving average price, and prices could fall further from the current trading level.

From the price-performance standpoint, its shares have delivered a negative return of approximately 34.21% on a year to date basis and losses of around 24.44% recorded in the past one-month period.

Key Risks
Liquidity risk; credit risk; and market risk (including interest rate risk, foreign exchange risk and other price risks).

Conclusion
Led by seasonality and lapping credit tightening actions taken in H1 2019, the combined US and UK revenue to grow by 15%, skewed to H2 2020. In 2020, the reorganised Developing Markets contributing 7 million pounds of revenue. The company is aiming that the group’s adjusted EBITDA will be break-even in the second half of 2020. The company continue to assess the possible impact of coronavirus (COVID-19) on investors and borrowers. The company has reduced its growth and shown an uncertain economic outlook.

The challenging economic and political situation in the UK region persisting. The group’s shares have tumbled substantially in the year-over period (-84.04% return) and traded substantially below its long-term support level of 200-day SMAs, which is considered being a bearish trend in the stock.

Therefore, based on the above rationale, we have given a “Watch” recommendation at the closing price of GBX 60.50 (as on March 11, 2020), while we look for the growth catalysts in the near-term.
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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