Tesco Plc

Tesco Plc (LON: TSCO) is a United Kingdom-based retail company and is one of the largest retailers of consumer goods in the world, serving millions of customers every week through stores as well as online space. The company mainly operates as a retailer of grocery products.

Trading Update
On 9th January 2020, Tesco announced its trading and Christmas Update for the third quarter. Though the UK environment remained full of challenges, the company had been able to outperform the market due to its strong operational delivery and attractive customer offer. The customers were benefited from low prices. The company during the Christmas period performed well in terms of value and volume and delivered a strong performance in the fresh food segment. The company’s 'Festive 5' vegetable offer and plant-based foods were complemented well by improvement in quality and price. The company witnessed improvement in customer satisfaction with its shopping trip. The online grocery business across the 19 weeks delivered more than 14 million orders. The company launched Clubcard Plus in November and saw a positive response from its customers. The company reviewed its Malaysia and Thailand businesses, which include evaluation for sale of businesses as well. The Tesco bank sales went up by 0.1 per cent in Q3, 1.6 per cent during the Christmas period and 0.5 per cent for the 19-week period.

Share Price Performance

Daily Chart as of  January 9^th, 2020, before the market close (Source: Thomson Reuters)

Tesco Plc shares were trading at GBX 255.70 at the time of writing before the market close (at 10:09 AM GMT) on 9^th January 2020 and were up by 1.87% versus the previous day closing price. Stock's 52 weeks High is GBX 260.40 and Low is GBX 209.00.The shares of the company have delivered a positive return of 6.49 per cent in the last month.

Conclusion
The company has delivered a decent financial performance in the first half of the fiscal year 2020. The external conditions are challenging, and the company is facing challenges in the Central Europe business sales. There are some uncertainties such as Brexit, macroeconomic environment, etc. but still the company has delivered its turnaround plan and transform its business. The company is expecting the second half of the fiscal year 2020 to be better than the first half of FY 2020. The company is in a strong position to generate sustainable growth, and it is looking attractive to invest for the long term.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 251.00 (as on 8^th January 2020).

BT Group

BT Group Plc (LON: BT.A) is a fixed-line telecommunication company, based out of London. The group’s business is built around the clients, delivering value and serving their needs persistently. The group is segregated into four customer-facing lines of business: Enterprise, Openreach, Consumer, and Global. The company’s operations are divided into four reportable division, namely Enterprise, Openreach, Consumer, and Global.

Financial Highlights – H1 Financial Year 2020 (30 September 2019, £, million)
In the first half of the year 2020, driven by strategically reducing low margin business, a decline in the legacy products and effect of regulation, the company’s reported revenue decreased by 1 per cent to GBP 11,467 million versus GBP 11,588 million in H1 FY2019. Adjusted revenue declined by 2 per cent to GBP 11,413 million in H1 FY2020. Driven by a rise in the spectrum fees, content costs, and enhance competitive positioning investment, the adjusted EBITDA declined by 3 per cent to GBP 3,923 million. In H1 FY20, the PBT (profit before tax) stood at GBP 1,333 million versus GBP 1,340 million in H1 FY2019. The company’s basic earnings per share surged by 2 per cent from 10.6 pence in H1 FY2019 to 10.8 pence in H1 FY2020. Net cash inflow from operating activities stood at GBP 2,173 million in H1 FY20; normalised free cash flow was down by 38 per cent to GBP 604 million, driven by the increased capital expenditure, higher interest and tax payments, partly offset by one-off cash flows.

Share Price Performance

Daily Chart as of  January 9^th, 2020, before the market close (Source: Thomson Reuters)

BT Group Plc shares were trading at GBX 196.30 at the time of writing before the market close (at 8:29 AM GMT) on 9^th January 2020 and were up by 0.20% versus the previous day closing price. Stock's 52 weeks High is GBX 241.40 and Low is GBX 157.67.The shares of the company have delivered a positive return of 3.95 per cent in the last month.

Conclusion
In Openreach segment, the company is the largest FTTP (Fibre to the Premises) network in the United Kingdom, including more than 2 million premises passed, 4 million by March 2021; ambition to pass 15 million by mid-2020s, subject to the right conditions; and ultimately wants to cover most of the UK.

For the financial year 2021, the company’s transformational plans drive long-term growth, due to the cost transformation programme on track. The environment is shifting in a way that will reward large scale investment in FTTP over the 2020s. Over the last year, the company has de-risked the pension deficit, progressed ahead of target with the transformation plan, substantially launched 5G services and accelerated the FTTP build across the United Kingdom.

Based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 195.58 (as on 9^th January 2020, before the market close at 8:10 AM GMT).

Hargreaves Lansdown Plc

Hargreaves Lansdown PLC (LON: HL.) is a number one investment supermarket for private investors in the UK. Over 35 years, the company has helped investors to save tax, money, and time on their investments. 

Recent News
On 6^th January 2020,Hargreaves Lansdown stated that it would release its interim results ending 31^st December 2019 on 31^st January 2020, Friday.

Trading Update
Hargreaves Lansdown announced the trading statement for the period from 1st July to 30th September 2019. The net new business for the current period was £1.7 billion, due to a variety of channels comprising ongoing wealth consolidation onto the platform from existing clients, direct back book transfers from J.P. Morgan and Baillie Gifford (£0.9bn), organic new client growth, and continued flows into cash management service “Active Savings”. In the current period, the company’s new clients increased to 35,000 against the previous period (2018: 29,000), taking active clients to 1.3 million. On 30th September 2019, the assets under administration (AUA) surged by 3% to £101.8 billion as compared with the previous period (30 June 2019), driven by the positive market movements of £0.8 billion. For the current period, the net revenue rose by 6% to £128.1 million as compared with the previous year (2018: £120.8 million). This is benefitting from higher AUA levels due to the market growth and net new business.

Share Price Performance

Daily Chart as of  January 9^th, 2020, before the market close (Source: Thomson Reuters)

Hargreaves Lansdown Plc shares were trading at GBX 1,934.00 at the time of writing before the market close (at 8:32 AM GMT) on 9^th January 2020 and were up by 1.18% versus the previous day closing price. Stock's 52 weeks High is GBX 2,437.19 and Low is GBX 1,615.29.The shares of the company have delivered a negative return of 4.03 per cent in the last six months.

Valuation Methodology

*Peers: AJ Bell Plc, Admiral Group Plc and IntegraFin Holdings Plc

Conclusion
In the current period, the company has reported a decent start to the fiscal year for the client, revenue, and net new business growth. The group continues to emphasise on the strategy of delivering decent information, service, and value during these continued uncertain times for the clients. However, the company has seen a new business in the current period being impacted by weak investor sentiment arising from continuing political uncertainty and Brexit in the United Kingdom and wider international macro issues such as trade tariffs. Whilst, the company expect that costs will typically be allied to client number progress, the group is mindful of the external market environment, and hence stay watchful on costs in spite of the revenue and client growth experienced during the present period.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the current price of GBX 1,934.49 (as on 9^th January 2020, before the market close at 8:05 AM GMT), while we look for any upcoming catalysts in the near term.

Bunzl Plc

Bunzl Plc (LON: BNZL) is a specialist international distribution company, which is engaged in supporting businesses by distributing non-food consumable products to a range of markets in various countries and seeks help to increase the efficiency and improve the competitiveness of its customers by offering customised solutions to B2B customers. 

Recent News
On 9th January 2020, Bunzl announced the acquisition of Cleveland, Ohio based Joshen Paper & Packaging. The acquisition will help the company to expand its operations in the United States.

Trading Statement
The company announced the pre-close update for the year ending 31st December 2019. For the financial year 2019, the group revenue is expected to have surged in the range of 2%-3% at actual exchange rates. While on a constant exchange rates basis, the revenue is anticipated to increase by approximately 1%, driven by the net of disposals, impact of acquisitions, with underlying revenue widely unchanged against the previous year. The company has newly acquired an emergency and safety response supplies company.  FRSA (Fire Rescue Safety Australia) is mainly involved in the distribution of personal protection equipment, and specialist safety focused on rescue, fire, and emergency response services.  This business is a Perth-based, which operates from five different locations across Australia. Its annual revenue is around £19 million. In the upcoming year, the company has plans to acquire three businesses, including this acquisition, for a total capex of around £120 million.

Share Price Performance  

Daily Chart as of  January 9^th, 2020, before the market close (Source: Thomson Reuters)

Bunzl Plc shares were trading at GBX 2,065.00 at the time of writing before the market close (at 10:26 AM GMT) on 9^th January 2020 and were up by 1.72% versus the previous day closing price. Stock's 52 weeks High is GBX 2,554.60 and Low is GBX 1,891.50.The shares of the company have delivered a positive return of 3.88 per cent in the last three months.

Conclusion
Due to mixed macroeconomic conditions across sectors and countries in which the company operates the underlying revenue growth is slowing down. The company's expectations for the FY2019 remain unchanged. It faces various uncertainties and principal risks which could impact the overall business of the company. The company operates in a competitive environment. Competition pressure could affect the revenue and profitability of the company. An unsuccessful acquisition could impact the profitability of the company. Fluctuations in the exchange rates could affect the profitability of the company. However, the company expected an increase in revenue for the year by 2-3 per cent. The company is making acquisitions which is an essential step for the growth of the business. The company looks promising for the long term.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 2,030 (as on 8^th January 2020).
 
*All forecasted figures and Peers information has been taken from Thomson Reuters.

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