Keller Group PLC

Keller Group PLC (KLR) is a London, the United Kingdom-based geotechnical solutions specialist company. The company’s business is differentiated in three segments: North America, EMEA and Asia-Pacific (APAC).

On 19^th November 2019, the company will announce the Trading Update.

Trading Update (as on 20^th September 2019)
The company issued a trading update and reiterated its current outlook for the full year 2019. As reported earlier, the full-year 2019 revenue was still anticipated to be broadly flat against 2018 data, with an increase in the margin gradually driving a surge in the profit. The full-year 2019 result is more dependent than usual on the timing of anticipated large contract awards and the crystallisation of several clients claims that are in their final stages of negotiation. In EMEA, the company stays mixed, with decent progress in the main continental European businesses being complemented by the challenging market conditions in several geographically peripheral operations. In APAC, the company are in line with the winning of new targeted contracts in the Australia. The company continues to anticipate that net debt will decrease year-on-year, driven by the anticipated improvements in the profit and the focus on cash generation. On an IAS 17 basis, the company stay on the path to meet the year-end leverage target of net debt/EBITDA in the range of 1x-1.5x.

Share Price Performance

 Daily Chart as at November-07-19, before the market closed (Source: Thomson Reuters)

On 7^th November 2019, Keller Group PLC shares were trading at GBX 526 at the time of writing before the market close (at 9:50 AM GMT) and remained the same against the previous day closing price. Stock's 52 weeks High and Low are GBX 742/GBX 463.

Valuation Methodology


Conclusion
In the medium term, the company stays strategically well-positioned with continuing favourable market fundamentals anticipated to support profitable growth.The order book continues to be decent, and the company stay focused on positioning the business to take full advantage of the positive market trends of infrastructure and urbanisation growth.

While the Brexit negotiations had an impact on the markets of the group, the wider construction market and sales volumes can be impacted by a hit to consumer confidence due to a no-deal Brexit scenario. Moreover, longer-term effects remain difficult to predict as there could be less profitable opportunities in the chosen markets. Difficulties in obtaining the EU workers within the supply chain and increased material costs as a result of depreciation in sterling also remains a threat to the company.

Based on the risks associated with the company’s operations, we have given a "WATCH" recommendation at the closing price of GBX 526 (as on 6th November 2019) with support from few catalysts needs to be evaluated at a later stage.

Superdry PLC

Superdry (SDRY) is an apparel brand with the main focus on providing good quality products. The company’s products use British style with a mix of Americana and Japanese inspired graphics.

On 12^th December 2019, the company will announce the interim results.

Pre-Closing Statement (as on 7^th November 2019)
The company announced a trading update for the 26-week period to 26^th October 2019. In H1 FY2020, the group’s revenue decreased by 11.3 per cent to £367.8 million as compared with the corresponding period of the last year, due to a decline in-store, e-commerce, and wholesale businesses. This also reflects an anticipated year of reset, and the need to address several legacy issues across the business. The second quarter store revenue was down by 9.4 per cent. Store gross margin for the first half of 2020 was reported at 71.4 per cent, an increase of 3.2% pts from the same period of the last year. Average retail space surged by 0.1 per cent to 1,187 thousand sq. ft as compared with the corresponding period of the last year.

Share Price Performance

Daily Chart as at November-07-19, before the market closed (Source: Thomson Reuters)

On 7^th November 2019, Superdry PLC shares were trading at GBX 450.40 at the time of writing before the market close (at 11:35 AM GMT), up by 6.13% against the previous day closing price. Stock's 52 weeks High and Low are GBX 874.50/GBX 354.

Valuation Methodology


Conclusion
The company is making decent progress with a start to the turnaround plan for the company, returning the business to its design-led roots. The company is moving the enterprise away from a reliance on constant promotions, and while this emphasis on full-price sales has affected revenue in the H1 FY2020, this is being partly offset by a better gross margin performance.

The company’s revenue for the current period has declined as compared to the corresponding period of the last year’s performance, and the profitability margins have remained stagnant or declined. The uncertainty over the Brexit will impact the group’s business performance.

As the company operates worldwide, their financial performance can be dented with the fluctuations in the exchange rateand can also lead the company towards legal and regulatory risks. The company expect the financial performance in the financial year 2020 to reflect the historic issues inherited with uncertain market conditions.

Based on the risks associated with the operations of the company and the stock trading near the 52w low, we recommend investors to keep a “Watch” on the stock at the current price of GBX 450.40 (as on 7^th November 2019, before the market close), with support from few catalysts needs to be evaluated at a later stage.

Redde PLC

Redde Plc (REDD) is a United Kingdom-headquartered consumer services company, which provide services related to accident management. The group mainly works with prestige motor dealerships, insurance companies, and insurance brokers.

Financial Highlights (for the year ended 30 June 2019, £’000)

(Source: Annual Report, Company Website)

In FY19, the company’s reported revenue increased by 11.9% to £589.7 millionagainst the £527 million in FY18. For the financial year 2019, EBITDA reduced by 0.9% to £54.9 millionagainst the £55.4 million in FY18. The adjusted basic EPS surged from 13.27 pence in FY18 to 13.44 pence in FY19. Debtor days at 30 June 2019 stood at 116 days versus 105 days at 30 June 2018. On 30 June 2019, net debt was £34.7 million, and total cash balance was £11.9 million.

Share Price Performance

Daily Chart as at November-07-19, before the market closed (Source: Thomson Reuters)

On 7^th November 2019, Redde PLC shares were trading at GBX 108 at the time of writing before the market close (at 8:20 AM GMT), down by 1.996% against the previous day closing price. Stock's 52 weeks High and Low are GBX 187.80/GBX 82.30.

Conclusion
The company’s supply chain will be disturbed by the effects of ongoing Brexit. In the United Kingdom, the company’s financial and operating performance is affected by the economic conditions.

From the perspective of the market, the members of the ABI (Association of British Insurers) mentioned that the cost of repairs has surged, driven by the surged repair cost of realigning and the costs of bumper safety sensors. At the same time, the lag in the availability of several spare parts sourced from overseas and the rising complexity of repairs has accelerated the repair times.

As a result, the positive impact on working capital is anticipated to increase traction later in the fiscal year 2020 to accommodate this extension. The company has won several new contracts in other regions of the Redde PLC as well as a contract renewal with a key insurer, all of which have contributed to the Board’s confidence in its anticipations for the fiscal year 2020.  The first quarter trading of the financial year 2020 was in line with the management anticipations. This will be the sixteenth consecutive dividend payment since June 2013.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 108 (as on November 07, 2019, before the market closed).
 

Shield Therapeutics PLC

Gateshead, the United Kingdom-based Shield Therapeutics Plc (STX) is a pharmaceuticals and Biotechnology company that is involved in the research, development as well as commercialisation of late-phase pharmaceuticals which are hospital focused.

Recent News
On 22^nd October 2019, the group made a press release regarding Positive Results for Ferric Maltol (Feraccru®/Accrufer™) in AEGIS-H2H phase 3b non-inferiority study at the 27th UEG (United European Gastroenterology) Week 2019.
Financial Highlights (for the six months ended 30th June 2019)

In H1 FY19, the revenue for the period was reported to be at £2.61 million, a surge of 428.28 per cent year on year from the revenue reported in H1 FY18 at £495,000. Research and development costs charged to the income statement needs to be considered in aggregation with capitalised development costs.  In H1 FY19, £1.3 million worth of development costs have been charged to the income statement, which was reported to be £2.1 million in the first half of previous year and an additional £1.2 million has been capitalised, which was reported to be around £2.7 million in H1 2018. The company reported a cash balance of £6.6 million as on 30th June 2019.

Share Price Performance

Daily Chart as at November-07-19, before the market closed (Source: Thomson Reuters)

On 7^th November 2019, Shield Therapeutics PLC shares were trading at GBX 182.96 at the time of writing before the market close (at 10:30 AM GMT), down by 0.02% against the previous day closing price. Stock's 52 weeks High and Low are GBX 202/GBX 28.

Conclusion
The company’s profitability margins for the period remained in the negative zone.The company has witnessed geopolitical tensions which have resulted in the economic slowdown in the multiple geographies globally. The portfolio companies have made a decent growth in a shorter duration and are striving towards the main clinical and development milestone in the year ahead. The company has built a promising portfolio of biotech companies, developing highly innovative therapies in vital areas of medical need. Currently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited.

Based on the above rationale, we have given an “AVOID" recommendation at the closing price of GBX 183 (as on 06 November 2019). 
 
*All forecasted figures have been taken from Thomson Reuters.

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