SSP Group PLC

SSP Group Plc (SSPG) is a food and beverage franchise operator. The company operates stores, lounges, cafes, restaurants, food courts and bars in travel locations such as train stations, motorway service stations, airports and other locations.

Pre-Close Trading Update (as on 26^th September 2019)
For the fourth quarter of the financial year ending 30 September 2019, the group reported that the trends seen in like-for-like sales growth in Q3 FY19 continued into the Q4, and it anticipates revenue to surge by around 7.8 per cent on a constant currency basis, including net contract gains of around 6 per cent and like-for-like sales increase of around 1.8 per cent. Driven by the newly begun operations in Brazil and a substantial increase in the Continental Europe and North America, net contract gains for the financial year 2019 are anticipated to be just above the prior anticipations of 5.5 per cent. In Q4 FY19, revenues for the period are anticipated to surge by around 10 per cent year-on-year at actual exchange rates. Due to a slower passenger progress and the effect of airport redevelopment, like-for-like sales continued to be held back in Continental Europe, while rail has stayed softer in the United Kingdom and air sector has been resilient over the Q4 period.

Share Price Performance

Daily Chart as at October-25-19, before the market closed (Source: Thomson Reuters)

On 25th October 2019, SSP Group PLC shares were trading at GBX 631.20 at the time of writing before the market close (at 1:30 PM GMT), up by 0.51% against the previous day closing price.

Valuation Methodology

*Peers: TUI AG, Restaurant Group PLC, Whitbread PLC, InterContinental Hotels Group PLC, Compass Group PLC.

Conclusion
The company do operate in a market full of economic and geopolitical uncertainties but is performing well based on cautious planning. The company anticipates having good growth opportunities in the travel sector, which will boost its profitability margins. The diversity of the business and flexibility of the model leave the company well placed to profit from the substantial structural progress opportunities in the markets and to create further value for shareholders.

SSP Group PLC witnessed a CAGR growth of ~11.85% in revenue over the period of FY15-FY18 while net income recorded a stellar CAGR growth of ~29.96% during the same period.

Based on the decent fundamental performance and the valuation done using the above method, we have given a “BUY” recommendation at the closing price of GBX 628 (as on 24^th October 2019) with  lower double-digit upside potential based on 11.02x NTM Price/Cash Flow (approx.) on FY20E cash flow per share (approx.).
 

Renishaw PLC

United Kingdom-based Renishaw Plc (RSW) is among the world’s prominent engineering and technology group which is specialising in precision and healthcare measurement.

On 30 January 2020, the company will announce the Half-year results.

Trading Statement (as on 15^th October 2019)
The company announced its trading update for the first quarter of 2020 period ended September 30, 2019. In Q1 FY20, the company’s revenue stood at £124.6 million, a decrease from the corresponding period of the last year. In the first quarter of 2020, the company’s profit before taxation (adjusted) was £4.3 million as compared to £32.6 million in Q1 FY19. On 30^th September 2019, the company had net cash balances of £98.5 million as compared to £106.8 million at 30th June 2019.

Financial Highlights (for the year ended 30 June 2019)

In the fiscal year 2019, the company’s reported revenue stood at £574.0 million. As a result of a slowdown in demand for encoder and machine tool products in the APAC region, the revenue from Metrology plunged by 7 per cent to £532.9 million in the financial year 2019. Group’s spectroscopy and dental product lines contributed to a 15 per cent rise in Healthcare revenue. In FY19, the company’s statutory profit declined by 29 per cent to £109.9 million as compared to £155.2 million in FY18. The company proposed a final dividend per share of 46 pence for the financial year 2019. The company’s total dividend per share for the fiscal year 2019 was recorded at 60 pence.

Share Price Performance

Daily Chart as at October-25-19, before the market closed (Source: Thomson Reuters)

On 25th October 2019, Renishaw PLC shares were trading at GBX 3,498 at the time of writing before the market close (at 10:30 AM GMT), up by 0.57% against the previous day closing price.

Conclusion
The company’s revenue declined in the Q1 FY20 and in FY19. As previously indicated, trading conditions are anticipated to stay challenging through the rest of this financial year driven by the international macroeconomic environment. With the ongoing uncertainty surrounding Brexit, weaker economic indicators, exchange rate volatility and trade tensions between the USA and China, we expect market conditions to remain difficult throughout this financial year. The company’s P/E, P/CF, and EV/EBITDA multiple are significantly higher as compared to the industry multiple, reflecting overstretched valuations.

Based on the above rationale, we have given an “AVOID" recommendation at the current price of GBX 3,498 (as on 25 October 2019, before the market closed).
 

Hochschild Mining PLC

Hochschild Mining Plc (HOC) is a precious metal maker company. The company is mainly focusing on the good quality gold and silver deposits.

On 15^th January 2020, the company will announce the Q4 2019 Hochschild Mining Production Results.

Production Update (as on 23^rd October 2019)
The company has announced the Q3 2019 production report.The group reported another robust quarter with production of 4.3 million ounces of silver, 67,797 ounces of gold, 9.8 million silver equivalent ounces, and 121,395 gold equivalent ounces. The group’s net debt stood at approximately $30 million as at 30th September 2019 against the $61 million as at 30 June 2019.

Financial Highlights (six months to 30 June 2019)
In the first half of the financial year 2019, the company’s reported revenue reduced by 5 per cent to $354,450 thousand against the $372,328 thousand in H1 FY2018, driven by a decrease in the average price of silver. The total net profit of the year 2019 stood at $16,661 thousand in H1 FY2019 against $10,718 thousand in H1 FY2018. The total basic and diluted earnings per share were US$0.03 in H1 FY2019 against the US$0.03 in H1 FY2018. Interim dividend per share was 2 cents, a surge from 1.965 cents in H1 FY18.

Share Price Performance
 
Daily Chart as at October-25-19, before the market closed (Source: Thomson Reuters)

On 25th October 2019, Hochschild Mining PLC shares were trading at GBX 197 at the time of writing before the market close (at 12:30 PM GMT), down by 0.767% against the previous day closing price.

Conclusion
In H1 FY19, the company’s top-line and bottom-line performance decreased. In spite of the weak fiscal performance, the group is anticipating a rise in demand for both silver and gold. With the international financial markets started experiencing volatility, the growth prospects of precious metals will increase in the year 2019. The group’s growth strategy revolves around lower costs, optimising projects at earlier stages and strategic partnerships to maximize the shareholders’ value. The group’s board declared an interim dividend per share of 2 cents, which reflects the ongoing successful operational and strategic performance.

Therefore, based on the above rationale, we have given a "Hold" recommendation at the closing price of GBX 195.50 (as on October 24, 2019).
 

Strix Group PLC

Strix Group PLC (KETL) is an Isle of Man, United Kingdom-headquartered world leader in kettle safety controls, which is engaged in designing, manufacturing and supplying kettle safety controls and other components and devices involving water filtration, steam management, and water heating and temperature control.
Financial Highlights (for the six months ended 30 June 2019, £million)

(Source: Interim Presentation, Company website)

Despite continued challenges presented by the macro-economic environment, revenue grew by 2.5% to £43.9 million (H1 2018: £42.9 million) with a constant currency increase of around 1%, reflecting product mix changes. Reported profit after tax was £6.9 million (H1 2018: £8.3 million), representing an increase of £1.6 million in exceptional costs, and adjusted profit after tax was £10.9 million, an increase of 2.6% on the prior period (H1 2018: £10.6 million). Due to working capital movements and the decrease in reported operating profit, net cash generated from operating activities declined to £10.9 million (H1 2018: £15.2 million), while net debt increased since 31 December 2018 to £33.4 million (2018: £27.5 million).  Adjusted diluted earnings per share rose by 1.8% to 5.4p and the group declared an interim dividend of 2.6p (H1 2018: 2.3p).

Share Price Performance

Daily Chart as at October-25-19, before the market closed (Source: Thomson Reuters)

On 25th October 2019, Strix Group PLC shares were trading at GBX 176.20 at the time of writing before the market close (at 11:45 AM GMT), up by 4.38% against the previous day closing price.

Conclusion
Global political issues such as Brexit and USA-China tradedispute have a disruptive impact on supply chains and market growth has slowed in line with weaker global economic growth, which might lead to the market becoming more price-sensitive. If a significant shift in market pricing occurs, several low-cost competitors may attempt to increase their market share. Without necessarily allowing an increase in the sales price of products, a significant change in the cost of certain raw materials can impact profitability as the group is exposed to fluctuations in the prices of some raw materials.

Currently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level.

Based on the above rationale, we have given an “AVOID" recommendation at the current price of GBX 176.20 (as on 25 October 2019, before the market closed).
 
*All forecasted figures and peers have been taken from Thomson Reuters.
*The “Buy” recommendation is also valid at the current price as on October-25-2019.

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.