CLS Holdings Plc

CLS Holdings Plc (CLI) is a Real Estate Investment & Services company making investments in commercial property. The company holds its assets in Germany, France and the UK. The group is headquartered in London, and since 1994, its shares got listed on LSE (London Stock Exchange. The company develop stable cash flows through investment in office space with high-quality in non-prime locations in the major European cities. The company presently provides cost-effective premises to more than 700 tenants working in government organisations and blue-chip corporations.

Recent News
On 14th October 2019, CLS Holdings announced the acquisition of multi-let office building in Reading named as Pacific House. The building is 5,303 sqm (57,086 sq. ft) in the area and was acquired for £14.9 million (excluding costs).

On 3rd October 2019, CLS Holdings announced the acquisition of two office buildings in London. Both the buildings in combination has annual passing rent of £4.2 million and will increase CLS' rental income.

Financial Highlights – H1 Financial Year 2019 (30^th June 2019, £, million)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2019, driven by an increase in revenue from the United Kingdom and Germany businesses, the company’s revenue increased to £67.60 million from £63.3 million in H1 FY2018. The company’s revenue less costs stood at £37.6 million in H1 FY2019 versus £36.3 million in H1 FY2018. The company’s operating income increased from £76.8 million in H1 FY2018to £97.8 million in H1 FY2019. The company’s PBT (Profit before tax) increased from £66 million in H1 FY2018to £84.6 million in H1 FY2019. The company’s PAT (Profit after tax) from continuing operations stood at £68.5 million in H1 FY2019 versus £61.4 million in H1 FY2018. The company’s Profit for the period (continuing and discontinued operations) stood at £66.7 million in H1 FY2019 versus £60.3 million in H1 FY2018. The basic and diluted earnings per share from continuing operations stood at 16.8 pence in H1 FY2019 versus 15 pence in H1 FY2018. The basic and diluted earnings per share (continuing and discontinued operations) stood at 16.6 pence in H1 FY2019 versus 14.9 pence in H1 FY2018.

Share Price Performance

Daily Chart as at October-15-19, before the market closed (Source: Thomson Reuters)

On 15th October 2019, CLS Holdings Plcshares were trading at GBX 262.00 at the time of writing before the market close (at 3:37 PM GMT), up by 1.55% against the previous day closing price. Stock's 52 weeks High and Low are GBX 267.00/GBX 195.00.

Valuation Methodology


Conclusion
The company’s financial performance had slightly improved in the first half of the financial year 2019. Both the top-line and the bottom-line performance has slightly improved for the period. The company’s operations are impacted negatively due to uncertainty created by the Brexit as it will result in an uncertain political and economic climate for short to medium term.

The company’s operational performance will also be impacted if it is not able to receive proper funding to make further property investments. Poor asset management will also have a negative impact on the financial performance of the company as it can adversely impact the group’s market capitalisation.

The wait and see approach has helped the company to show resilient performance in the UK market. Although the trade tensions remained a threat to global growth, due to strong domestic demand and limited new offices supply, both the French and German business had shown good growth.

Based on the above rationale, we recommend investors to keep a "Watch" on the stock at the current price of GBX 262 (as on 15^th October 2019, before the market close), with support from few catalysts needs to be evaluated at a later stage.
 

Jadestone Energy Inc

 
AIM-listed Jadestone Energy Inc (JSE) is engaged in the business of exploration and production of oil and gas. The group is headquartered in Singapore, and as on August-08-2018, its shares got listed on Alternative Investment Market of LSE.

Financial Highlights (for the three and six months ended June 30, 2019, US$’000)

(Source: Company Filings, LSE)

During the second quarter of 2019, the company’s net revenue increased to US$115.3 million as compared with the corresponding period of the last year. For the six-month period to June 30, 2019, the net revenue stood at US$171.7 million, an increase from the US$35.8 million in H1 FY2018. Profit before tax was US$44.6 million in H1 FY19 versus a loss before tax of US$19.8 million in H1 FY18, while profit before tax stood at US$34 million in Q2 FY19. In Q2 FY19, the profit after tax was US$22.6 million versus a loss of US$4.9 million in Q2 FY2018 and nearly a three-fold surge over Q1 FY19 profit of US$8.4 million.  For the six-month period to June 30, 2019, the profit after tax stood at US$30.9 million against the loss of US$21.5 million in H1 FY18. On 30^th June 2019, the gross debt was US$73.4 million, a decrease from the US$86.6 million at the end of March 2019. Average price realisations were US$71.70/bbl, a surge of 6 per cent from the Q1 FY19.

Share Price Performance

Daily Chart as at October-15-19, before the market closed (Source: Thomson Reuters)

On 15th October 2019, Jadestone Energy Inc shares were trading at GBX 51 at the time of writing before the market close (at 2:24 PM GMT), down by 0.97% against the previous day closing price. Stock's 52 weeks High and Low are GBX 60.40/GBX 33.50. The company’s stock beta stood at 4.03, reflecting the higher movement of the stock as compared to the benchmark index.

Valuation Methodology


Conclusion
The group is substantially exposed to the volatility in the crude oil prices, as recent fall in the crude oil prices impacted the performance of its shares as well. The growing tension between Iraq and the US and sanction imposed by the US on Iraq and Venezuela could further make the oil prices volatile in the near term.

In the second half of 2019, the company’s production will be benefitting from the Stag 49H infill well and due to the successful riserless light well intervention programme at Montara, and continued optimisation of production operations. For the full year 2019 guidance, the company’s production will be in the range of 13,500—14,500 bbls/d and opex will be in the range of US$21—24 per boe. The company is also improving the contracts for key project elements and commercial gas revenues negotiations, heading towards field expansion proposal submission in the late third quarter of 2019, and maintain to work towards formal development sanction in the financial year 2019. The company’s balance sheet is quite robust as the net debt was effectively eliminated by the mid-year.

Based on the decent performance of the company in the Q2 and H1 FY19, positive future outlook in terms of both production and sales and valuation done using the above methodology, we have given a "Speculative Buy" recommendation at the current price of GBX 51 (as on October 15, 2019, before the market close), with lower double digit upside potential, based on the 0.75x Industry Average NTM EV/Sales multiple (approx.) on the FY19E sales (approx.).
 
*All forecasted figures have been taken from Thomson Reuters.
* The conversion rate used to convert USD to GBP – 0.791746 GBP (as on October-15-2019).

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