Coca Cola HBC AG (LON: CCH)

Business Overview
Coca Cola HBC AG is a Switzerland based company engaged in the business of production and distribution of non-alcoholic beverages. The company is a bottler of Coca Cola Products. The company distributes Coca-Cola, Coca-Cola Zero, Coca-Cola Light, Fanta, and Sprite as well as water, energy drinks and juice.

Recent News
On 13^th December 2019, Coca-Cola HBC AG and The Coca-Cola Company has made an agreement. According to the agreement, both would have a 50% equity interest each for the contribution of the assets of the Multon Z.A.O group of companies.

Trading Update- Q3 FY2019

(Source: Interim Report, Company Website)

During the period under consideration, the group’s performance was impacted by poor weather conditions which impacted volumes in the group’s operating geographies. In the third quarter under review, the group’s net sales revenue on FX-neutral basis improved by 3.4 per cent and 5.0 per cent on a reported basis and volume surged by 1.1 per cent during the same period. The growth was broadly supported by a 6.5 per cent FX-neutral growth in emerging geographies, and 1.5 per cent FX-Neutral revenue growth in developed geographies. For the full-year FY19, the group expects FX-Neutral revenue growth of 4.0-4.5 per cent, including 70bps contribution from Bambi.

Volume Highlights
Volume in Emerging markets improved by 3.0 per cent or 0.8 per cent without considering the impact of Bambi and growth in this segment was driven by a low single-digit surge in Sparkling and double-digit expansion in Energy. Volume in Established markets improved in the third quarter by 1.2 per cent, driven by growth in Sparkling, ready-to-drink tea and Energy but was partially counterbalanced by a slump in Water and Juice volume. However, volume in the Developing markets slumped by 4.0 per cent, against 11.3 per cent expansion in the prior-year period, particularly in the Water category.

Share Price Performance

Daily Chart as on 7^thJanuary 2020, before the market closed (Source: Thomson Reuters)

On January 7^th, 2020, Coca Cola HBC AG shares were trading at GBX 2,629 at the time of writing before the market close (at 8:20 AM GMT), up by 0.038 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 2,950/GBX 2,283.46. The stock price has given 14.66 per cent returns during the previous year.

Valuation Methodology

Conclusion
Despite the bad weather conditions, the company maintained its share in its markets and to have made progress with its commercial strategy which delivered a step-up in price/mix and ongoing growth in key areas of strategic focus. The company is one of the leading Europe's beverage company which has sustained its growth in its business. However, there are some challenges and risks which could affect the overall business of the company. Failure to adapt to changing consumer health trends could impact the revenue of the company. Adverse weather conditions could decline the sales of the company. Risk of cybersecurity and a critical data breach could affect the operations and hamper the reputation of the company. Fluctuations in commodity prices and foreign exchange rates could affect the profitability of the company.

Based on the valuation and risks factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the current price of GBX 2,638 (as on 7^th January 2020, before the market close at 8:01 AM GMT), with support from few catalysts needs to be evaluated at a later stage.

John Wood Group Plc (LON: WG)

Business Overview
John Wood Group Plc is a multinational energy services’ company which is an international leader in the delivery of project, engineering and technical services to industrial and energy markets.

Recent News
On 7^th November 2019, the company hosted a Capital Markets Presentation. Its objective was to provide an insight to analysts and investors about Wood's strategic objectives, macro trends and key growth drivers for the business.

Trading Update (As on 7^th November 2019)
The company announced its trading update for FY2019. Although operations are impacted by the slow macro environment, the company’s EBITDA remained in line with expectations. The cost reduction measures resulted in improved financial performance. The formation of TCS has accelerated synergy delivery. The company’s cash flow remained the same as excepted. The company would be selling its nuclear business for $305 million and is expected to be done by Q1 FY2020. The company’s AS EAAA (Asset Solutions EAAA) is performing well in the Asia Pacific, Caspian and in the Middle East.

On 16th January 2020, the company will announce the trading update for the year ended 31 December 2019 and on 10^th March 2020, the company will announce the full-year trading results for the year ended 31 December 2019.

Share Price Performance

Daily Chart as on 7^thJanuary 2020, before the market closed (Source: Thomson Reuters)

On January 7^th, 2020, John Wood Group Plc shares were trading at GBX 406.8 at the time of writing before the market close (at 9:35 AM GMT), down by 0.27 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 607.60/GBX 314. The stock price has given negative 26.57 per cent returns during the previous year. However, the stock price has recovered and given 20.46 per cent return and 25.55 per cent return in the last three months and one month respectively.

Conclusion
The company was affected by the slowing macro environment. However, the company is confident of delivering full-year EBITDA in line with the expectations. The ongoing trade war between the US and China has impacted the company’s performance and the company is focusing on cost reduction measures which could benefit its financial performance. The company operates in multiple geographies due to which its profits can be impacted negatively due to the foreign exchange rate fluctuations. The company has plans to sell its nuclear business which would accelerate its progress to target leverage. The company has many value-accretive projects in the pipeline with low risk and higher production. The company is well-positioned for revenue growth in key markets.

The company’s total revenue has grown from USD 5,001 million in FY2015 to USD 10,014 million in FY2018, giving approximately 26 per cent growth on a CAGR basis.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 403.9 (as on 7th January 2020, before the market close at 8:45 AM GMT). 
 
*All forecasted figures and information have been taken from Thomson Reuters.
*Currency exchange rate taken for 1 Euro = 0.85 GBP.

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