Rolls-Royce Holdings Plc (LON: RR)

Business Overview
Rolls-Royce Holdings Plc is a London, United Kingdom-headquartered multinational engineering company with a focus on power and propulsion systems.

Recent News
On 28^th February 2020, the company announced Dame Angela Strank had been appointed as a Non-Executive Director. She would join the Group from 1 May 2020.

Financial Highlights - Financial year (31^st December 2019, GBP, million)

(Source: Final Report, Company Website)

In the fiscal year 2019, the Group’s underlying revenue grew by 7 per cent (organic change) to GBP 15,450 million as compared to GBP 15,067 million in the fiscal year 2018. The core underlying revenue increased by 6 per cent (organic change) to GBP 15,261 million against GBP 14,286 million in the fiscal year 2018. Both Group and core underlying operating profit increased 25 per cent to GBP 808 million and GBP 810 million respectively due to organic improvement in Civil Aerospace division. Underlying Earnings per share of the Group reduced to 15.9p against 16p in the last year. Free cash flow of the Group increased to GBP 873 million in FY2019 versus GBP 568 million in FY2018 while Free cash flow of the core increased to GBP 911 million in FY2019 versus GBP 648 million in FY2018.

Share Price Performance  

Daily Chart as on 28^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 28, 2020, at the time of writing (before the market close, at 10:40 AM GMT), Rolls-Royce Holdings Plc shares were trading at GBX 634.4, up by 5.5 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 958.80/GBX 586.20. 

From the technical standpoint, 14 days-Relative Strength Index of the stock is hovering near the oversold zone which is a bullish signal for stock price.

Valuation Metrics

(Source: LSE Website)

As on 31^st January 2020, the Price to Cash flow multiple of the Rolls-Royce Holdings Plc’s was 6x, which was significantly lower as compared with the Aerospace & Defense industry of 11.1x, reflecting that the company is trading at a lower multiple as compared to its peers.

Growth Catalysts
The company based on its strong and agile business model is amongst the market-leading brands in the market. The group is focused on technology innovation and operational excellence, which will help them to take advantage of the growing and fast-changing global market. The company has strong segmental performance, which helps them to capture more market share.

Conclusion
The company has reported a decent financial performance in the fiscal year 2019. After a period of substantial investment, the company stay devoted to delivering enhanced returns and will continue to invest in the innovation as needed to realise the long-term ambition to be the world’s foremost industrial technology company. In Power Systems division, while trading stays strong, a small number of larger projects have been deferred. The company had been pioneering globe-first technology (over the last 5 years), and it will also contribute to the United Kingdom’s next-generation Tempest programme.

Over the course of 4 years (FY14 - FY18), the company’s revenue surged from GBP 13,736 million in FY14 to GBP 15,729 million in FY18. Compounded annual growth rate (CAGR) stood at 3.45 per cent.

Based on the decent prospects, we have given a "HOLD" recommendation at the closing price of GBX 600.60 (as on 27th February 2020).

RSA Insurance Group Plc (LON: RSA)

Business Overview
RSA Insurance Group Plc is a British general insurer, offering insurance to individuals and businesses ranging from small businesses to large corporations. The primary operating segments are differentiated based on geography and comprise of Scandinavia, Canada, UK & International and Central Functions.

Recent News
On 27^th February 2020, the company announced that Alastair Barbour would step down from the position of Non-Executive Director of the company on or around 9^th October 2020.

Financial Highlights - Financial year (31^st December 2019, GBP, million)

(Source: Final Report, Company Website)

In the fiscal year 2019, the Group’s net written premiums were GBP 6,417 million as compared to GBP 6,470 million in the fiscal year 2018. Underwriting profit in FY2019 was GBP 346 million against GBP 250 million in FY2018. Profit before tax in FY2019 has increased to GBP 492 million as compared to GBP 480 million in FY2018. Underlying profit before tax increased to GBP 565 million as compared to GBP 492 million in the fiscal year 2018. Profit after tax stood at GBP 383 million in FY2019 versus GBP 372 million in FY2018.

Share Price Performance  
 

Daily Chart as on 28^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 28, 2020, at the time of writing (before the market close, at 11:30 AM GMT), RSA Insurance Group Plc shares were trading at GBX 516, down by 3.49 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 736.84/GBX 497.20. 

From the technical standpoint, 14 days-Relative Strength Index of the stock is hovering in the oversold zone which is a bullish signal for stock price.

RSA Insurance V/S FTSE-100 Price – 1 year

(Source: Thomson Reuters)

In the last year, RSA Insurance share price has given1.02 per cent return as compared to negative 6.67 per cent return of FTSE-100 index, which shows that the stock has outperformed the index during the last year.

RSA Insurance V/S Industry V/S Sector – 1 year
 

(Source: Thomson Reuters)

In the last year, RSA Insuranceshare price increased by 1.6 per cent, while the industry decline by 6.37 per cent and sector declined by4.94 per cent.

Growth Catalysts
The company’s focus is to expand the client base; to expand the business where underwriting conditions permit; and to re-underwrite and re-price in those business lines which saw the challenging results in the earlier years. Significant renewal in the management and a repositioning of the Group’s UK & International division have benefitted the company and showed good prospects. The Group is focusing on improvement in underwriting performance with the effective measures in cost control.

Conclusion
The company has recorded a decent financial performance in the fiscal year 2019 driven by improved underwriting, which has produced record current year profits and combined ratio. Overall, the markets are competitive, though accommodating underwriting measures in several portfolios reacting to industry losses. Financial markets persist to current challenges, mainly from the decrease in the bond yields. The Group's strong capital position with a dedicated cost reduction programme helps to improve the financial performance despite the harsh business environment scenario. Its reinsurance programme has been consistent with the increased uncertainty, and the company seeks to take on more risks according to its appetite only.

Based on the decent prospects, we have given a "HOLD" recommendation at the current price of GBX 507.80 (as on 28th February 2020 before the market close at 9:37 AM GMT).

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