Persimmon Plc (LON: PSN)

London Stock Exchange-traded Persimmon Plc is a British Home Construction company. Key Brands comprise of Persimmon Homes, Charles Church, Westbury Partnerships and Space4. As on April 29, 1985, its shares were admitted to the main market of the London Stock Exchange.

Trading Update- Q3 FY19 (period from 1 July 2019 to 6 November 2019)
As on November 07, 2019, the group reported its trading update for the third quarter ended as on November 06, 2019. The group’s performance was majorly in line with the management expectations, with 2,100 new homes being delivered currently to the housing association partners in the financial year to date.

Trading activities has continued to be robust throughout the second half of the present financial year, with its average weekly private sales reservation rate per site stood at c. 0.67, which was in line with the previous financial year.
For the current year, the group is now fully sold up and holds £950m of forward sales reserved beyond 2019 against £987m reserved in 2018. Sales prices stood firm across the regional markets, and cancellation rate remained in line with the year-over period, at historically low levels.

Financial Highlights: H1 FY19 (period ended as on June 30, 2019)
 

Source: Company filings

During the six-months under consideration, the group’s revenue declined by 4.5% to £1.75bn from £1.83bn recorded a year-ago period, driven by relatively lower new homes sold during the period at 7,584 against 8,072 new homes sold in the same period of the corresponding financial year, which led to a 5.6% decline in the new housing revenues to £1,645.3 million vs £1,742 million in H1 FY18. However, the average selling price improved marginally to £216,942 from £215,813.

Underlying operating profit for the group was 1.6% lower at £510.1m against £518.2m recorded a year-over period and underlying new housing operating margin stood at 31.0%, which was 130 bps ahead of the last financial year of 29.7%.Basic earnings per share for the period under consideration stood at 129.3p vs 134.9p reported a year ago.

During the first half of 2019, the group’s return on capital employed was marginally lower at 40.5% against 41.7% reported a year-over period.

Stock Performance
 
Daily Price Chart (as on November 07, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close at 01:06 PM GMT), shares of the PSN, traded 62 points or 2.72% higher at GBX 2,338.0 respectively. In the year-over period, shares of the group have registered a 52w high of GBX 2,529.0 and a 52w low of GBX 1,802.50.
On a YTD basis, its shares have surged approximately 17.93%, up 20.01% in the past three months and increased 8.6% in the last one-month, respectively.

Conclusion
The business performance may be impacted considering the heightened Brexit related and December 12, 2019, General Election uncertainties, along with a slowdown in the global economic activity with muted demand. The group has fully sold up for the current year and holds £950m of forward sales reserved beyond 2019.

Also, a thumping majority for the Boris Johnson-led conservative will stimulate new homes demand post snap election, as the Conservative government has pledged for planned tax cuts to facilitate first-time homebuyers, which will benefit Persimmon and the overall industry as well.

Fundamentally, the group is well-positioned within the Home Construction Industry, with industry-leading EBITDA Margin, Net Margin and Return on Equity, with zero debt contribution in the capital structure of the company, which eliminate the balance sheet risks of the group.

Also, at the current trading of GBX 2,338.0, its shares were trading well-above its short-term and long-term support levels of 50-day and 200-day simple moving averages, a bullish technical measure. However, the Moving Average Convergence divergence is trading below the 9-day EMA signal line.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 2,276.0 (as on November 06, 2019).
 

Woodford Patient Capital Trust Plc (LON: WPCT)

Woodford Patient Capital Trust Plc (London Stock Exchange-traded) is a closed-ended investment company. The group's operational activities are - investment in unquoted and quoted equities of companies listed or incorporated predominantly in the United Kingdom (UK). As on April 21, 2015, shares of the WPCT were admitted to the main market of the London Stock Exchange.

Key Development
In the exchange filing made by the group as on October 24, 2019, the board of directors announced the appointment of Schroder Investment Management Limited as the company’s portfolio manager and expected to execute by the end of this calendar year. Subsequently, the company’s name will be revised to Schroder UK Public Private Trust Plc.

Financial Highlights: H1 FY19 (period ended as on June 30, 2019)
 
Source: Company filings

In the first half under consideration, the group’s loss from investments and derivatives at fair value stood at £229m against a profit of £6.86m recorded a year-over period. Also, at the end of H1FY19, the group’s net assets plummeted 13.94% to £654m against £760m reported a year-over period and Net Asset Value Per Share slumped 21.6% to 72.0p from 91.94p reported a year-over period and declined 26.2% from December 31, 2018 data.

Stock Performance
 
Daily Price Chart (as on November 07, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close at 02: 24 PM GMT), shares of the WPCT traded 1.7% higher at GBX 32.95 from the previous day, and in the year-over period, it has registered a 52w high price of GBX 91.0 and a 52w low of GBX 29.6, respectively.

Its shares have tumbled more than 62% on a YoY basis, approximately 60.6% on a YTD basis, down around 24% in the past three months and plunged approximately 22% in the past one month respectively, which reflects, the steep downtrend in the stock.

Conclusion
The group is undergoing through a crisis, invoked by the erstwhile portfolio manager, as their investments in unquoted investments went completely wrong for their flagship LG Income Focus Fund. Also, trust in the widely famous Neil Woodford has been jolted badly, after he put a restriction on withdrawal from his Income Focus Fund.

The pain is deep, and it will take a considerable amount of time to recoup and re-position company in the UK's asset management industry.

Also, its shares were nosediving since past couple of months and could further continue with the prevailing trend.

Therefore, based on the above rationale, we have given an "Avoid" recommendation at the current price of GBX 32.95 (as on November 07, 2019, before the market closed).

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