Rolls-Royce Holdings Plc

 
Rolls-Royce Holdings Plc (LON: RR) is a London, United Kingdom-headquartered multinational engineering company with a focus on power and propulsion systems.

Trading Update (as on 7th November 2019)
The Group released the statement for the trading update post the half-year results, and for Trent 1000 update. Full-year Free Cash Flow and operating profit are expected to be on the lower end of the prior estimates announced by the group. Free Cash Flow would reach at least 1 billion pounds in the year 2020. All the Trent 1000 issues have been resolved as stated by the company, barring the exception of one design change, that is yet to be made.

Financial Highlights – H1 Financial Year 2019 (30^th June 2019, GBP, million)
In the first half of the financial year 2019, the company’s underlying revenue rose by 7 per cent to £7,353 million, while reported revenue surged by 5 per cent to £7,883 million in H1 FY2019. Underlying operating profit saw an improvement of 32 per cent from the previous year same period data. For the first half of 2019, underlying loss per share was 1.6 pence against the earnings per share of 2.5 pence in H1 FY2018, while reported loss per share stood at 48 pence in H1 FY2019.

Share Price Performance

Daily Chart as of February 21^st, 2020, before the market close (Source: Thomson Reuters)

Rolls-Royce Holdings Plc shares were trading at GBX 664.6 at the time of writing before the market close (at 8:05 AM GMT) on 21^st February 2020 and remained same versus the previous day closing price. Stock's 52 weeks High is GBX 989.47 and Low is GBX 619.74. The shares of the company have delivered a positive return of 2.40 per cent in the last month.

Valuation Methodology

*Peers: Meggit Plc, Ultra Electronics Holdings Plc, BAE Systems Plc and Senior Plc.

Growth Catalysts
The company based on its strong and agile business model is amongst the market-leading brands in the market. The group is focused on technology innovation and operational excellence, which will help them to take advantage of the growing and fast-changing global market. The company has strong segmental performance, which helps them to capture more market share.

Conclusion
After a period of substantial investment, the company stay devoted to delivering enhanced returns and will continue to invest in the innovation as needed to realise the long-term ambition to be the world’s foremost industrial technology company. In Power Systems division, while trading stays strong, a small number of larger projects have been deferred, and as a result, the group now anticipate sales growth for the financial year 2019 in the low- to mid-single-digit range. The company had been pioneering globe-first technology (over the last 5 years), and it will also contribute to the United Kingdom’s next-generation Tempest programme.

Over the course of 4 years (FY14 - FY18), the company’s revenue surged from GBP 13,736 million in FY14 to GBP 15,729 million in FY18. Compounded annual growth rate (CAGR) stood at 3.45 per cent.

Based on the healthy prospects and supported by valuation done using the above method, we have given a "BUY" recommendation at the current price of GBX 659.80 (as on 21^st February 2020, before the market closed at GMT 8:11 AM), with single-digit upside potential, based on 7.80x NTM Price/Cash Flow (approx.) on FY19E cash flow per share (approx.).

Senior Plc

Senior Plc (LON: SNR) is an engineering and manufacturing solutions provider with 32 operating businesses in 14 countries. 

Market Update (as on 31^st January 2020)
On 31st January 2020, Senior released an update for market and trading. The company as per its trading update on 7th November 2019, expect revenue in FY2020 to be on the lower side from Aerospace Division and will return to growth in FY2021. The expected revenue to decline by around 20 per cent versus FY2019 data. Driven by benefits from lower tax rate and reduction in central costs, the group expects its revenue for the full-year to be in line with expectations and adjusted earnings per share is to be ahead of Board's expectations. The company’s overall financial position remained robust with healthy cash flows generation. The full-year results will be announced on 2nd March 2020, Monday.

Share Price Performance

Daily Chart as of February 21^st, 2020, before the market close (Source: Thomson Reuters)

Senior Plc shares were trading at GBX 155.00, at the time of writing before the market close (at 9:26 AM GMT) on 21^st February 2020 and remained same versus the previous day closing price. Stock's 52 weeks High is GBX 239.00 and Low is GBX 149.90.
Valuation Methodology


*Peers: Meggit Plc, BAE Systems Plc, Rolls-Royce Holdings Plc and Qinetiq Group Plc.
Growth Catalysts
The group’s overall financial position remains strong and continues to generate healthy cash flows. The group is focused on technology innovation and operational excellence, which help then to capture more market share.

Conclusion
After Boeing decision to halt737 MAX production temporarily, the company expect its revenue from Aerospace Division to decline in FY2020and will return to growth in FY2021.The group’s revenue for the full year 2019 is expected to be in line with anticipations. In the full year 2019, the adjusted earnings per share are expected to be ahead of the Board’s prior anticipations, driven by a reduction in the effective tax rate and one-off benefits from lower central costs.

Over the course of 4 years (FY14 - FY18), the company’s revenue surged from GBP 820.8 million in FY14 to GBP 1,082.1 million in FY18. Compounded annual growth rate (CAGR) stood at 7.15 per cent.

Based on the decent prospects, and supported by valuation done using the above method, we have given a “BUY” recommendation at the current price of GBX 153.70 (as on 21^st February 2020, before the market close at 11:13 AM GMT) with a single digit upside potential, based on 8.15x NTM Price/cash flow (approx.) on FY20E cash flow per share (approx.). 

Atalaya Mining Plc

Atalaya Mining Plc (LON: ATYM) is a mining & development company which produces copper and silver by-product in southwest Spain at its sites.

Operational Update (Q4 FY2019)
On 16^th January 2020,Atalaya Mining released an update for operational performance for the fourth quarter of the financial year 2019 and guidance for the financial year 2020. The copper production stood at 13,527 tonnes in Q4 FY2019versus 11,172 tonnes in Q4 FY2018. The copper production in FY2019 increased by 6.7 per cent to 44,950 tonnes versus 42,114 tonnes in FY2018, while the copper recovery rate (annual) stood at 87.09 per cent. The copper prices declined in the Q4 versus Q3 data. The copper production is expected to be in between 55,000 tonnes to 58,000 tonnes in FY2020.

Financial Highlights – Q3 Financial year 2019 (30th September 2019, EURO, thousand)
In the third quarter of the financial year 2019, the company’s revenue grew to Euro 44.38 million as compared to Euro 42.81 million in the third quarter of the fiscal year 2018 due to increased volumes sold during Q3 2019 and stronger average US Dollar rates against the Euro. EBITDA of the company grew to Euro 9.869 million due to lower operating cost and higher revenues. The company’s profit for the period was Euro 6.933 million.
 
Share Price Performance
 

Daily Chart as of February 21^st, 2020, before the market close (Source: Thomson Reuters)

Atalaya Mining Plc shares were trading at GBX 173.845 at the time of writing before the market close (at 10:46 AM GMT) on 21^st February 2020 and went up by 0.49% versus the previous day closing price. Stock's 52 weeks High is GBX 242.00 and Low is GBX 170.60.

Valuation Methodology
 


Growth Catalysts
The company is investing in expansion projects, which would enhance its production rates. Strategic growth initiatives, technological advancements, and increasing global usage of copper may provide new growth opportunities to the company.

Conclusion 
The company has increased its production guidance for FY2020, followed by enhanced recovery levels which is positive for the company. However, the company is subject to various risks that could impact the business of the company. Lack of replacement of reserves could hamper the operations of the company.  The company has delivered a decent financial and operational performance during the third quarter of the fiscal year 2019. The company is investing in expansion projects, which would enhance its production rates. The company has good growth prospects, and it looks promising for long term sustainable business.
 
Over the course of 2 years (FY16 - FY18), the company’s revenue surged from EUR 98.8 million in FY16 to EUR 189.5 million in FY18. Compounded annual growth rate (CAGR) stood at 38.42 per cent.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 173.00 (as on 20^th February 2020) with single-digit upside potential based on 8.60x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

Univision Engineering Ltd

Univision Engineering Ltd (LON: UVEL) is a provider of CCTV Surveillance System in Hong Kong with distributorship on Japan, Europe and the USA.

Financial Highlights – H1 Financial Year 2020 (30^th September 2019, GBP, thousand)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2020, the company’s revenue declined to GBP 5,032 thousand versus GBP 6,373 thousand in H1 FY2019. The PBT (profit before tax) and PAT (profit after tax) declined to GBP 178 thousand in H1 FY2020 from GBP 1,012 thousand in H1 FY2019. The basic earnings per share stood at 0.0463 pence in H1 FY2020 versus 0.2638 pence in H1 FY2019.

 Share Price Performance

Daily Chart as of February 21^st, 2020, before the market close (Source: Thomson Reuters)

Univision Engineering Ltd shares were trading at GBX 1.40 at the time of writing before the market close (at 11:33 AM GMT) on 21^st February 2020 and remained same versus the previous day closing price. Stock's 52 weeks High is GBX 2.99 and Low is GBX 1.20.

Growth Catalysts
With the increase in the demand for networking and wireless infrastructure, the company expect video surveillance market to grow as companies and government seek to enhance safety and security across different industries. The group is focused on diversifying its customer base, which helps then to capture more market share.

Conclusion
While the recent pro-democracy protests and clashes in Hong Kong have impacted the general business environment, the company expects it to provide business opportunities, as work orders for replacement of damaged CCTV equipment caused by vandalism are likely to come and authorities are expected to upgrade the video surveillance system. The majority of revenue was generated from the MTRC project, which is expected to improve in the future period. The group is seeking to diversify its customer base to grow its business.

Over the course of 4 years (FY15 - FY19), the company’s revenue surged from GBP 3.68 million in FY15 to GBP 14.22 million in FY19. Compounded annual growth rate (CAGR) stood at 40.2 per cent.

Based on the decent growth prospects, we have given a “Speculative Buy” recommendation at the current price of GBX 1.30 (as on 21^st February 2020, before the market closed).
 
 
*All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 Euro = 0.8367 GBP.
*The “Speculative Buy” recommendation is also valid for the current price as covered in the report (as on February-21-20).

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