Imperial Brands Plc

Imperial Brands Plc (IMB), is a fast-moving consumer goods (FMCG) company with a core business built around a tobacco portfolio. The group provides smokeless and fine cut cigars, tobaccos and papers, and a broad range of cigarettes.

Financial Highlights – H1 Financial Year 2019 (31st March 2019, £, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, driven by a good underlying tobacco performance and strong growth in Next Generation Products portfolio, adjusted net revenue was up 3.8 per cent to £3,656 million from £3,523 million in H1 FY2018. The net revenue surged by 2.5 per cent on CER (constant exchange rate) basis. The company’s reported revenue surged by 2.3 per cent to £14,390 million in H1 FY2019 from £14,060 million in H1 FY2018. Due to lower expenses related to amortisation during the period, operating income increased by 38.1 per cent from £833 million in H1 FY2018 to £1,150 million in H1 FY2019. Adjusted earnings per share of 115.6 pence were up by 1.1 per cent AER (actual rates) and declined by 1.3 per cent CER (constant currency), while reported basic earnings per share were at 71.2 pence, up by 37.7 per cent. The IMB’s board has declared an interim dividend of 62.56 pence per share, which stood 10 per cent higher on a YoY basis. 

Share Price Performance

Daily Chart as at October-30-19, before the market closed (Source: Thomson Reuters)

On 30th October 2019, Imperial Brands Plc shares were trading at GBX 1,733.20 at the time of writing before the market close (at 10:38 AM GMT), down by 1.44 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 2,789.00/GBX 1,727.40.

Valuation Methodology

*Peers: Heineken Holding NV, Tate & Lyle Plc, Britvic Plc and Savencia SA.

Conclusion
In the H1 of the financial year 2019, the company’s reported results have been progressive, with a more focussed approach to establish NGP. The company, with its shifted focus on Next Generation Products, will result in positive results in the near term.

The company is seeking to grow its sales with higher margins through market priorities and longstanding brand to exploit opportunities in the tobacco sector. Also, the group has established its NGP (new generation products) named "blue" as a leading brand in growing retail network in Germany, Japan, Britain, Ireland, France, Italy and Spain.

The company’s earnings have been impacted positively with the foreign exchange rate fluctuations. Over the course of 4 years (FY14 - FY18), the company’s revenue surged from £26,460 million in FY14 to £30,066 million in FY18. Compounded annual growth rate (CAGR) stood at 3.25 per cent.

Based on the above rationale and supported by valuation done using the above method, we have given a "BUY" recommendation at the current price of GBX 1,729.55 (as on 30th October 2019, before the market close as at 9:25 AM GMT) with single-digit upside potential based on 6.70x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

Fevertree Drinks Plc

Fevertree Drinks Plc (FEVR) is a London- Headquartered beverages company. Its geographical areas of operations were divided into segments like the United Kingdom, Europe, United States of America and Rest of the World.

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

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, led by decent growth reported by the group across all of their four operating segments and remarkably in the United States where the group has secured substantial distribution gain and operational progress, the  group's revenue during the period surged by 13 per cent on a reported basis and 12% by constant currency basis to £117.3 million against the £104.2 million in H1 FY2018. Adjusted EBITDA surged by 800bps on a reported basis and 700bps on a constant currency basis and stood at £36.7 million. However, the adjusted EBITDA margin declined slightly to 31.3 per cent in H1 FY19. This led to a 7 per cent increase (reported basis) in the diluted EPS and stood at 24.3 pence.

Share Price Performance

Daily Chart as at October-30-19, before the market closed (Source: Thomson Reuters)

On 30th October 2019, Fevertree Drinks Plc shares were trading at GBX 1,944.50 at the time of writing before the market close (at 11:55 AM GMT), down by 1.84 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 3,290.00/GBX 1,924.00

Valuation Methodology

*Peers: Stock Spirits Group Plc, Nichols Plc, Hilton Food Group Plc, Britvic Plc and Greencore Group Plc.


Conclusion
The unfavourable weather condition in the UK impacted the group in the H1 FY2019, and UK sugar tax has also impacted its group's margin. However, these impacts were already discounted by the management and the reported performance was in line with the expectations.

In the recent interim report, the group reported decent growth in all the four operating geographies and the group has secured a no.1 position as a mixer in the UK in both off-trade and on-trade basis. The group witnessed a strong growth in the United States during the H1FY19 and revenue surged by 31% to £19.8m and 24% growth on a constant currency basis, supported by several operational changes made by the company post taking direct control in June 2018.

The group also has strong fundamental metrics as it has maintained an EBITDA margin above 25% since last many years and even net margin of the company reported in the past couple of years was substantially above the industry median. Also, the return on equity (ROE) recorded by the group in the past several years was considerably above its peer’s average.

Therefore, based on the above rationale and valuation done using the above methodology, we have given a "Speculative Buy" recommendation at the current price of GBX 1,925.61 (as on 30th October 2019, before the market close) with single-digit upside potential based on 37.00x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

FDM Group (Holdings) Plc

FDM Group (Holdings) Plc (FDM) is a London-headquartered international professional services company which recruits, trains and deploys its own permanent IT and business consultants at client sites across several sectors, with operations in Europe, North America and APAC.

Financial Highlights - H1 Financial Year 2019 (30th June 2019, £, million)
 

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the total revenue increased by 14 per cent to £134.4 million as against £117.8 million in H1 FY2018. Adjusted operating profit rose by 7 per cent to £27 million while reported operating profit rose to £25.23 million from £23.2 million in H1 2018. Adjusted profit before tax was up by 7 per cent to £26.6 million from £24.9 million reported last year, while reported profit before tax rose by 9 per cent to £24.9 million against £22.9 million in H1 2018. Adjusted basic earnings per share were reported at 18.9 pence, while basic earnings per share rose in the period to 17.6 pence. The company rose the interim dividend by 10 per cent to 16.0 pence.
Share Price Performance

Daily Chart as at October-30-19, before the market closed (Source: Thomson Reuters)
On 30th October 2019, FDM Group (Holdings) Plc shares were trading at GBX 733.00 at the time of writing before the market close (at 1:02 PM GMT), down by 1.08 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 1,014.00/GBX 645.00.
Valuation Methodology


Conclusion
While the model of the company is resilient against any direct impact from threats and uncertainties which are expected to arise from Brexit, spending decisions of some clients in the UK and EU could be adversely impacted by the effects of Brexit. However, in the event of downturn, the company can see increased demand for its services as Mounties can be attractive to clients during times of economic or political uncertainty, as companies would be reluctant to hire permanent employees, making contractual labour more attractive. Moreover, the group has a diversified global geographical footprint, which ensures a sustained flow of cash in case of turbulence in one region.

 
Based on the healthy prospects and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the current price of GBX 727 (as on 30^th October 2019, before the market close as at 12:02 PM GMT) with single digit upside potential, based on 20.80x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

Blue Prism Group Plc

Blue Prism Group PLC (PRSM) is a Software & Computer Services company providing RPA (Robotic Process Automation). The company helps its customers globally to automate the business processes to control costs.
Recent News
On 22nd October 2019, Blue Prism Group announced that Dr Jason Kingdon had re-assumed his position of full-time Chairman (Executive).
Financial Highlights – H1 Financial Year 2019 (30th April 2019, £, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, recognised revenue for the period expanded by 76 per cent to GBP 40.4 million while group revenue, under the IAS 18 standard, grew by 82 per cent to GBP 41.6 million. The Adjusted EBITDA losses surged from a loss of GBP 4.2 million in H1 FY2018 to GBP 34.0 million in H1 FY2019. Due to an increase in the operating expenses for the period, the company reported an operating loss of GBP 34.6 million in H1 FY2019 versus an operating loss of GBP 26 million in H1 FY2018. The LBT (loss before tax) stood at GBP 34.4 million in H1 FY2019 versus an LBT (loss before tax) of GBP 5.5 million in H1 FY2018. The LAT (loss after tax) stood at GBP 35 million in H1 FY2019 versus a LAT (loss after tax) of GBP 5.5 million in H1 FY2018. The basic and diluted loss per share was at 48.72 pence in H1 FY2019 as against a basic and diluted loss per share of 8.39 pence in H1 FY2018.

Share Price Performance

Daily Chart as at October-30-19, before the market closed (Source: Thomson Reuters)

On 30th October 2019, Blue Prism Group Plc shares were trading at GBX 827.00 at the time of writing before the market close (at 8:43 AM GMT), up by 0.85 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 2,030.00/GBX 774.25.

Valuation Methodology
 
*Peers: WANdisco PLC, Check Point Software Technologies Ltd, AVEVA Group PLC, Intuit Inc and Kape Technologies PLC.

Conclusion
The company operates in a highly competitive market, which is rapidly evolving. The dynamic nature of the industry can impact the financial capability of the group. The recent acquisition of Thoughtonomy has helped the company to enter mid-tier of the market and will provide a productive solution to its customers connected to the company’s RPA platform. The company is well-positioned to take advantage of the new growth opportunities, and the develop new software category to capitalize its Robotic Process Automation.

Based on the healthy prospects and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the closing price of GBX 820 (as on 29^th October 2019), with single-digit upside potential, based on 6.50x NTM EV/Sales (approx.) on FY19E Sales (approx.).

Bushveld Minerals Ltd

Bushveld Minerals Limited (BMN) is a Johannesburg, South Africa-based development and exploration company dealing in mineral projects. The company has differentiated its operations in four operating segments: Coal Exploration, Vanadium and Iron Ore, Vanadium Mining and Production, and Energy.

Recent News
On 23rd October 2019, Bushveld Minerals announced that the company has agreed for Yellow Dragon Holdings' early settlement as per acquisition agreement between Bushveld Vametco Limited for earn-out payable.

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

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the company’s reported revenue stood at $78 million as against $83.7 million in H1 FY2018. The decline in the revenue was due to lower sales volume for the period. In the H1 FY2019, the gross profit stood at $55 million versus $51 million in H1 FY2018. The company’s EBITDA was at $41 million in H1 FY2019 versus $42.8 million in H1 FY2018. Driven by higher selling and distribution costs and higher administrative expenses for the period, the company’s operating profit for H1 FY2019 declined to $37.5 million against $42.1 million in H1 FY2018. The PBT (profit before tax) was reported at $44.6 million for H1 FY2019 versus $41.4 million in H1 FY2018. The company’s Profit for the year stood at $30.8 million in the first half of the Financial year 2019 against $28.5 million in H1 FY2018. The basic and diluted earnings per share for H1 FY2019 stood at 1.92 cents as against 1.57 cents in H1 FY2018.

Share Price Performance

Daily Chart as at October-30-19, before the market closed (Source: Thomson Reuters)

On 30th October 2019, Bushveld Minerals Ltd shares were trading at GBX 22.70 at the time of writing before the market close (at 2:17 PM GMT), down by 4.42 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 50.19/GBX 19.50.

Valuation Methodology

*Peers: Hill & Smith Holdings PLC, Castings PLC, Anglo Pacific Group PLC and Central Asia Metals PLC.

Conclusion
Despite an increase in the selling and distribution costs and administrative expenses for the period, the company’s financial performance slightly improved in the first half of the financial year 2019. The company’s top-line performance has declined, but the gross profit and bottom-line performance have improved for the period.

The company is on track to increase production rates to 3,400 mtVp.a. in FY2020 and 4,200 mtVp.a. in FY2022 through proper transformation programme execution at Vametco. The company is also looking forward to developing a production platform of over 8,400 mtVp.a., and a 10,000 mtVp.a of nameplate capacity in the next 5 years.

The acquisition of Vanchem has enabled the company to offer a diverse variety of products to its clients from energy storage, chemicals and steel markets. The company is also investing heavily to increase its supply chain of vanadium individually and is also entering into strategic partnerships for the same.

Based on the decent growth prospects and supported by the valuation as done above, we have given a “Speculative Buy” recommendation at the current price of GBX 22 (as on 30th October 2019, before the market close as at 8:20 AM GMT) with single-digit upside potential based on 13.20x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 
*The “Speculative Buy” recommendation is valid for the current price as covered in the report (as on 30-October-19).
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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