Stobart Group Ltd

Stobart Group Ltd (LON: STOB) is FTSE All-Share listed Company, which provides infrastructure and support service to the aviation and energy sector.

Recent News

On 14 July 2020, the Company announced the disinvestment of Stobart Rail Limited to Bavaria Industries Group AG. Further, the Group plans to focus on the aviation business.

On 25 June 2020, the Company raised £100 million in gross proceeds by issuing 23,863,945 equity shares.

Financial Highlights (for the 12 months ended 29 February 2020, as on 4 June 2020)


(Source: Company Website)

The Company continued to make decent progress at an operating level as passenger numbers at London Southend Airport surged to 2.1 million (43.1% year-on-year). Meanwhile, waste wood tonnage supplied was gained to 1.5m tonnes (11.5% growth year-on-year). Consequently, the combined underlying EBITDA surged by 36% (year-on-year) to £32.8 million from their two main operating business. However, the Company reported a loss for the year of £137.9 million due to hefty impairments, depreciation, brand amortization and equity-accounted losses. Subsequently, in March, the Company implemented several measures to preserve liquidity, such as freezing discretionary expenditure and recruitment, furloughing 50% of employees, and reduced pay for the senior leadership and the Board.

Share Price Performance

 

1-Year Chart as at July-29-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Stobart Group Ltd’s shares were trading at GBX 26.15 on 29 July 2020 (before the market close at 1:33 PM GMT+1), up by 1.16% against the last day closing price. Stock 52 week High and Low were GBX 137.80 and GBX 23.99, respectively.

From the technical standpoint, the shares were trading below the short-term support level of 50-day simple moving average prices, which reflects a downward trend in the stock.

Risk Assessments

Current trading has been severely impacted due to Covid-19 pandemic as it is directly affecting the passenger volume. Moreover, the market dynamics are changing, and the Company might face inevitable uncertainties post-Brexit arrangements. Therefore, the Group might lose some significant customers. Also, the Company can face liquidity and credit risk amid the fluctuating diesel prices and exchange rates, following the massive loss reported in FY2020.

Conclusion

The Company witnessed a significant decline in performance in the financial year 2020. The top-line performance had improved for the period, while bottom-line performance declined drastically, and profitability remained in the negative zone for the period. Also, the Company is anticipating that all other non-core assets or businesses would be realised for value over the next three years. The disposal of non-core business will also provide financial resilience to withstand the challenging current environment. Moreover, the shares were trading below the short-term support level of 50-day simple moving average prices, which reflects a downward trend in the stock. Therefore, it is advisable to book profit as of now, considering global headwinds persisting currently due to COVID-19 pandemic. Moreover, the company’s Price/Earnings, and Price/Cash flow multiples are in negative zone as compared to the industry multiples.

Based on the risks factors as stated above, we have given a “Sell” recommendation at the current price of GBX 27.02 (as on 29 July 2020 before the market close at 9:00 AM GMT+1).

Immedia Group Plc

Immedia Group Plc (LON: IME) is an AIM-listed marketing service provider. It provides multi-media and digital audience engagement solutions for global businesses and leading brands.

Trading Update (as on 18 June 2020)

Considering the COVID-19 crisis, IME retained payments from major retail customers and formulated plans to preserve the business’s financial health for the long-term. With the re-opening of UK retail businesses, Immedia is looking to rebuild contracted revenues. The exposure to the UK retail sector remained substantial, and many clients closed the majority of stores and several deferred or cancelled the project work. The Group has not yet announced the audited accounts for the financial year 2019.  On 30 September 2020, it will file and publish the 2019 financial statements.

Share Price Performance

 1-Year Chart as at July-29-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Immedia Group Plc’s shares were trading at GBX 14.00 on 29 July 2020 (before the market close at 1:40 PM GMT+1), down by 6.67% against the last day closing price. Stock 52 week High and Low were GBX 29.00 and GBX 6.00, respectively.

From the technical standpoint, 14-day RSI is currently moving towards the overbought zone, which means there is a potential for a short-term correction in the stock price. Moreover, the shares were trading below the support level of 200-day simple moving average prices, which reflects a downward trend in the stock.

Key Risks

It is worth noting that higher operating expenses, particularly selling & marketing, are expected to keep margins under pressure. Moreover, high debt and stiff competition represent another risk factor.In the media market, the Company operates in a very dynamic environment. Further, it has also suspended the guidance for FY20. Weakening macro-economic environment could impact the overall business performance of the Group.

Conclusion
The Company has taken measures to preserve cash and used furlough measures offered by the government. The Company’s operations can be affected negatively due to ongoing uncertainties created over the COVID-19 mayhem. At present, the Group is unable to quantify the impact of Covid-19. The Group is also unable to predict the recovery rate of retail and how it will affect the cash flow and revenue for the short-term period.

From a technical perspective, RSI is indicating a bearish setup for the stock, and it is not financially viable to take a fresh position currently. Moreover, the shares were trading below the support level of 200-day simple moving average prices, which reflects a downward trend in the stock. Therefore, considering the global headwinds persisting currently due to COVID-19 pandemic, we recommend exiting from the stock at the current level. Moreover, the Company’s EV/EBITDA and Price/Earnings multiples are significantly higher as compared to the industry multiple, reflecting overstretched valuations.

Based on the risks factors as stated above, we have given a “Sell” recommendation at the current price of GBX 14.5 (as on 29 July 2020 before the market close at 2:50 PM GMT+1).

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