Legal & General Group PLC

Legal & General Group PLC is primarily engaged in providing products and services related to insurance and investment management (British holding company). It is one of the world’s largest insurance and investment management groups and operates worldwide through its subsidiaries and associates, with the United States and the United Kingdom being the primary markets.

On 26^th September 2019, the company will pay the 2019 interim dividend.
Financial Highlights (H1 FY2019, £million)

(Source: Interim Reports, Company Website)

For the first half of the financial year 2019, the company’s operating profit surged by 11 per cent to £1,005 million as against £909 million in the first half of the financial year 2018. The company’s PBT (Profit before tax) attributable to shareholders was £1,053 million in H1 FY2019 as against £942 million in H1 FY2018, up by 12 per cent. The company’s PAT (Profit after tax) attributable to shareholders was £874 million in H1 FY2019 as against £771 million in H1 FY2018, up by 13 per cent. The company’s EPS (Earnings per share) surged by 13 per cent to 14.74 pence in H1 FY19 as against 13 pence in H1 FY18. Return on Equity was recorded at 20.2 per cent in H1 FY19. The company (LGEN) announced an interim dividend per share of 4.93 pence in H1 FY19 as against 4.6 pence in H1 FY18. Profit after tax accelerated by 13 per cent to £874 million in H1 FY19 as against £771 million in H1 FY18.

Share Price Performance
 
Daily Chart as at August-27-19, before the market closed (Source: Thomson Reuters)

On 27th August 2019, at the time of writing (before the market close, GMT 10:18 AM), Legal & General Group PLC shares were trading at GBX 220.80 and decreased by 0.41% against the previous day closing price. Stock's 52 weeks High and Low are GBX 292.30/GBX 218.45. The company’s stock beta was 1.06, reflecting slightly higher movement of the stock as compared to the benchmark index.

Valuation Methodology

*Peers: Just Group PLC, Old Mutual Ltd, Prudential PLC, and Hansard Global PLC.

Conclusion
The company had shown decent growth in the first half of the financial year 2019. Despite political uncertainty, a decline in the asset market and slowing economic growth, the company was able to deliver good results to post eight years of compounded annual profit growth of over ten per cent.

Between 2011 and 2015, the company attained an EPS CAGR of 10 per cent per annum, and they are on track to deliver at least a similar performance in 2020.

The company has an internationally diversified asset portfolio with negligible exposure to United Kingdom and a credit default reserve of £3.2 billion. The second half of the year 2019 has started well, building on the success of the first half transactions including the Rolls-Royce PRT of £4.6 billion, Oxford University Future Cities deal of £4 billion and Japanese global index win of $50 billion.

The company is largely unaffected by on-going political and economic uncertainty and is well placed to continue to grow and take advantage of organic growth opportunities. The company continues to invest in technology and its balance sheet remains strong with a steady increase in surplus regulatory capital.

Based on the decent prospects and supported by valuation done using the above method, we have given a "BUY" recommendation at the closing price of GBX 221.70 (as on 23 August 2019) with high single digit upside potential, based on 7.58x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

Apax Global Alpha Limited
 

United Kingdom-based Apax Global Alpha Limited (APAX) is a closed-ended investment company. The group's investment main objective is to offer investors with capital appreciation from its regular dividends and investment portfolio strategy. The company focuses on derived investments and private equity funds. The group invests in Rest of Europe, India, Switzerland, the United Kingdom, North America, and China.

Financial Highlights (H1 FY2019, €’000)

(Source: Interim Reports, Company Website)

The company’s 2019 interim results reflect the robust half-year investment performance since the IPO in 2015. For the six-month period, the company’s total NAV Return stood at 13.4 per cent and adjusted NAV increased to €1,032 million, a significant milestone for the group. Adjusted NAV per share surged to €2.10 against the €1.90 on 31^st December 2018. Private Equity Investments remain the main driver of the performance. The Derived Debt portion of the portfolio achieved returns in line with its longer-term target, while returns in Derived Equity were flat in H1 FY19.

In H1 FY2019, the company’s total income increased to €131.8 millionas compared to the €60.9 million in H1 FY2018. Profit before tax stood at €125.1 million, an increase from the previous year same period data. Profit after tax for the period rose to €124.9 millionas compared with the corresponding period of the last year. Basic and diluted earnings per share climbed to 25.43 cents against the 11.08 cents in H1 FY18.

2019 Interim Dividend
The company declared an interim dividend of 4.86 pence per share(2018: 8.45 pence), down by 42.49% on the prior year. The dividend will be paid on 13th September 2019 and total Dividend Payment stood at GBP 23,867,497.

Share Price Performance

Daily Chart as at August-27-19, before the market closed (Source: Thomson Reuters)

On 27th August 2019, at the time of writing (before the market close, GMT 9:00 AM), Apax Global Alpha Limited shares were trading at GBX 157 and decreased by 0.317% against the previous day closing price. Stock's 52 weeks High and Low are GBX 160/GBX 127. The company’s stock beta was 0.56, reflecting the lower movement of the stock as compared to the benchmark index.

Conclusion
Apax Global Alpha Limited has performed well over the current half-yearly period, delivering on its quantified objectives. There is still uncertainty from trade tensions between China and the US, and new tensions might possibly arise between Europe and the US. In addition, Brexit anxieties remain unresolved. So far in 2019, the capital markets seem to be discounting the associated risks and the current sentiment whether persists into autumn is uncertain. In the Private Equity portfolio, the corporate carve-outs and public-to-private deals will continue to feature more prominently in sourcing deals. In Derived Investments, the main focus remains on identifying attractive prospects that will allow the company to continue to deploy its excess liquidity.

Therefore, based on the fundamental analysis, we have given a “Watch” recommendation at the closing price of GBX 157.50 (as on August 23, 2019), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures and peers have been taken from Thomson Reuters.
*The Buy recommendation is also valid at the current price as on August-27-2019.

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