PayPoint Plc (PAY)

PayPoint Plc is a United Kingdom-headquartered holding company. Through its subsidiaries, the group offers specialist consumer payment, and other services and products and transaction processing and settlement. Liontrust Investment Partners LLP, Woodford Investment Management Ltd., and Capital Research & Management Co. (Global Investors) are the major shareholders in the holding group. (Source: TR).

Trading Update Highlights: 1Q FY20
As on July 24, 2019, the company has reported its trading update for the three months ended June 30, 2019. Led by the decent contribution made by the group's Service fee, UK parcel growth and UK bill payment, the group's net revenue on a YoY basis expanded by 3.6% to £28.7m. However, ATM net revenue of the group slumped by 8.4% to £3.0m on a YoY basis.

Service fee leapt up by 30.7%, led by a successful rollout of PayPoint One to 13,633 sites at June 30, 2019, and recorded a 2.8% growth in the average weekly service fee. UK parcel volume during the period under consideration surged by 11.9% to 5.6m, driven by a new partnership which is now converting to volumes. Net revenue from UK bill payments grew by 7.5%, driven by the decent performance of MultiPay and strong performance of the group’s legacy business. Led by transactions growth in the first quarter of the FY20, the group’s Romania net revenue was up by 5.0% respectively.

At the end of 1Q FY20, the group’s net cash stood at £36.1m against £37.5m recorded as on 31^st March 2019.

Dividend – final and additional
In the same exchange filing, the company recorded that final dividend of 23.6p/share will be paid in two equal instalments of 11.8p/share each as on July 29 and September 30, 2019 as well. The additional dividend of 18.4p/share will be paid by the group in two equal instalments of 9.20 pence/share each on the same dates as final ordinary dividends.

Stock Performance
 
Daily price chart (as on September 06, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close, at 02:07 PM GMT), shares of the PAY were quoting at GBX 906/share and added 0.44% against the previous closing price. In the year-ago period, its shares have touched a 52w high price of GBX 1,158.0 and a 52w low price of GBX 721.98 respectively. Despite a decent rise in the stock price on a YTD basis (up by 11.5%), its shares were offering an attractive dividend yield of 4.66%.

Peer Comparison
 

Out of six parameters selected to conduct a cross sectional analysis of the company with its peer companies, we found on each and every parameter, PayPoint Plc had an upper edge against the peer’s average. Particularly, in terms of Return on Equity (ROE), Net Margin (%) and Dividend Yield (%) standpoint, the performance of the group was substantially better than the peer group companies. Also, the group had zero debt on its books against the peer’s average debt of 13%.

Conclusion
PayPoint Plc has delivered decent operating performance during the first quarter of the FY20. Bill payments in the UK and Romania provided a decent fundamental performance and the continued favourable growth was observed in the group’s MultiPay platform and eMoney services where transactions grew 38.5% and 16.3% respectively. Also, the Board of the group is confident that profit before tax and exceptional items for the year ending 31 March 2020 will be a decent progression.

Also, despite a decent surge in the stock price on a YTD basis, the stock is offering a decent dividend of 4.66%, which is an important fundamental measure from an income investor point of view.
From the fundamental ratios standpoint, particularly in terms of Return on Equity (ROE) and Net Margin, the group’s performance stood at 79.7% and 21% respectively and was substantially higher than the peer’s average ROE and Net Margin of 21% and 2% respectively. Also, despite a decent surge in the stock price, it is still available at a cheaper valuation in terms of Price-to-Earnings ratio and Price-to-Cash flow multiple as highlighted in the peer comparison table.

Therefore, based on the above rationale and discussion, we have given a “Hold” recommendation at the closing price of GBX 902.0 (as on September 05, 2019).
 

Genus Plc (LSE: GNS)

United Kingdom-headquartered Genus Plc creates advances to animal breeding and genetic improvement by applying biotechnology and sells added value products for livestock farming and food producers.Lansdowne Partners (UK) LLP, Baillie Gifford & Co. and Threadneedle Asset Management Ltd. are the major institutional investors in the company. (Source: Thomson Reuters)

Preliminary Results- FY19
As on September 05, 2019, the company reported its preliminary results for the year ended June 30, 2019.


Source: Company filing.

During the year under consideration, the group’s revenue of £488.5m increased by 4% and by 3% on a constant currency basis, driven by decent bovine revenue which was increased by 7% in constant currency basis. Adjusted operating profit comprising joint venture’s contribution and excluding gene editing recorded a growth of 6% in both constant and actual currency basis as well, driven by a decent surge of 15% in ABS at a constant currency basis.

Adjusted basic earnings per share on a YoY basis declined by 4% to 73.2p/share and down by 3% on a constant currency basis,mainly on account of a £2.4m tax credit in the prior year after US tax reforms.
The board of the company has recommended a final dividend of 18.8p/share, and including final dividend, the group’s total dividend stood at 27.7p/share and recorded a growth of 7% on a YoY basis.

Stock Performance
 
Daily price chart (as on September 06, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close, at 03:52 PM GMT), shares of the GNS were trading at GBX 2,816 and added 40 points or 1.44% against the previous day closing price level. In the past 52-weeks, its shares have touched a high of GBX 2,950.94 and a low of GBX 2,090 respectively. On a YTD basis, its shares have delivered a price return of 29.36%. In the last one month, the stock was up by 8.7% and in the previous five trading sessions, its shares gained approximately 7% at the LSE.

Peer Comparison
 

Out of six parameters selected to conduct a cross sectional analysis of the company with its peer companies, we found that on each and every parameter, GNS performance was weaker against the peer’s average. Particularly, in terms of Return on Equity (ROE), and Net Margin (%) standpoint, the performance of the group was substantially below the peer group companies.

Conclusion
The company recorded decent performance in the FY19, with increased revenue, expanded operating profit and reduced debt and decent pay-out ratio. But we believe the recent surge in the stock price over the past couple of months has already discounted these things and at a current trading level its shares were quoting at a premium against the peer average, in terms of price-to-book value per share and price-to-cash flow per share as well as highlighted in the peer comparison table. Also, the stock is hovering near its upper Bollinger Band®, which indicates some correction could take place in near-term.

Therefore, based on the above discussed measure and weaker performance of the group on the various parameters selected for relative analysis, we have given a “Watch” recommendation at the current price of GBX 2,816 (as on September 06, 2019), while we look for any upcoming catalysts in the near term.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.