EnQuest Plc

EnQuest Plc (LON: ENQ) is a London-headquartered independent production and development company which is focused on profitably enhancing hydrocarbon recovery and prolonging the useful lives of assets.

Financial Highlights – H1 Financial Year 2019 (30th June 2019, USD, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the company’s production increased by 27 per cent to 68,548 boepd versus 53,990 boepd in H1 FY2018, while the realised oil price increased by 11.1 per cent to 66.1 $/bbl for the period. The company’s revenue and other operating income increased by 56.5 per cent from $548.3 million in H1 FY2018 to $858.2 million in H1 FY2019. In H1 FY2019, gross profit stood at $269.9 million versus $100.8 million in H1 FY2018. The company’s EBITDA increased by 68.6 per cent from $311.9 million in H1 FY2018to $525.9 million in H1 FY2019. The company’s Profit before tax and financial expenses increased by 151.4 per cent to $264.5 million in H1 FY2019 from $105.2 million in H1 FY2018. The reported PAT (Profit after tax) was up by 2.3 per cent from $43.3 million in H1 FY2018 to $44.3 million in H1 FY2019. The company’s reported earnings per share declined by 18.2 per cent to 2.7 cents in H1 FY2019 from 3.3 cents in H1 FY2018.

Share Price Performance

Daily Chart as of  January 10^th, 2020, before the market close (Source: Thomson Reuters)

EnQuest Plc shares were trading at GBX 26.30 at the time of writing before the market close (at 11:36 AM GMT) on 10^th January 2020 and were up by 12.68% versus the previous day closing price. Stock's 52 weeks High is GBX 26.40 and Low is GBX 15.24.

Valuation Methodology

*Peers: RAK Petroleum Plc, Diversified Gas & Oil Plc, Serica Energy Plc and Volga Gas Plc.

Conclusion
The company was exposed to the impact of changes in both Brent crude oil prices and gas prices on its revenue and profits. The company’s policy is to manage the effects of commodity prices to protect against volatility and allow the availability of cash flow for repayment of debt and investment in capital programmes. A material decline in oil and gas prices adversely affects the company’s operations and financial condition. Unanticipated changes in the regulatory or fiscal environment can affect the company’s ability to deliver its business plan and potentially impact the revenue and future developments. The company remained focus to reduce its net debt and expects its net debt to be below $1.5 billion at the end of the financial year 2019. The company is actively looking for acquisitions to expand its operations and production capabilities.

Therefore, based on the above rationale, we have given a “Watch” recommendation at the current price of GBX 26.38 (as on 10^th January 2020, before the market close at 11:25 AM GMT), while we look for any upcoming catalysts in the near term. 

Amigo Holdings Plc

Amigo Holdings Plc (LON: AMGO) is a Bournemouth, United Kingdom-headquartered consumer finance group and is one of the largest providers of guarantor loan in the UK, which, through its subsidiaries, provides sales financing services.

Recent News
On 13th December 2019, Amigo Holdings announced that Stephan Wilcke, Nomination Committee’s Chairman and Clare Salmon have stepped down from Nomination Committee. Roger Lovering had been selected as new Chairman. James Benamor has also been selected as Nomination Committee’s member.

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

(Source: Interim Report, Company Website)

In the first half of the financial year 2020, driven by strong customer growth, the company’s Net loan book increased by 8.8 per cent to £730.7 million versus £671.7 million in H1 FY2019. The company’s revenue was up by 11.8 per cent from £130.1 million in H1 FY2019 to £145.4 million in H1 FY2020. Due to a provision for complaints and accelerated investment, the company’s cost: income ratio increased to 28 per cent for the period. The company’s PAT (Profit after tax) declined by 1.9 per cent to £37 million in H1 FY2020 from £37.7 million in H1 FY2019. The basic earnings per share declined by 9.3 per cent to 7.8 pence in H1 FY2020 from 8.6 pence in H1 FY2019.

Share Price Performance

Daily Chart as of  January 10^th, 2020, before the market close (Source: Thomson Reuters)

Amigo Holdings Plc shares were trading at GBX 63.20 at the time of writing before the market close (at 11:48 AM GMT) on 10^th January 2020 and remained same versus the previous day closing price. Stock's 52 weeks High is GBX 297.50 and Low is GBX 53.39.The shares of the company have delivered a positive return of 0.32 per cent in the last month.

Valuation Methodology
 
*Peers: PCF Group Plc, Paragon Banking Group Plc, Morses Club Plc, Plus500 Ltd and Lang & Schwarz AG.

Conclusion
The company believes that impairments are likely to remain at a higher level and operations might be negatively impacted by ongoing Brexit. Strong demand persists for its guarantor loan product, and new customer numbers will continue to grow. The company is also taking a cautious lending approach through an increase in provisioning and further enhanced its credit policy related to relending. New customer lending is being prioritised over relending to existing customers, and the company is continuously accelerating investment in its operations to enable continuous delivery of best in class customer service.

Over the course of 3 years (FY16 - FY19), the company’s revenue surged from GBP 102.1 million in FY16 to GBP 270.7 million in FY19. Compounded annual growth rate (CAGR) stood at 38.14 per cent.

Based on the decent prospects of the group, and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 62.50 (as on 10^th January 2020, before the market close at 11:45 AM GMT) with single-digit upside potential, based on 3.96x NTM Price/Cash flow (approx.) on FY20E cash flow per share (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.76471 GBP.

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