GVC Holdings Plc (LON: GVC)

Business Overview
GVC Holdings Plc is an Isle of Man-incorporated sports-betting and gaming groups. The company owns some of the leading brands in the gaming industry and is one of the largest sports betting and gaming groups in the world.

Recent News
On 16^th March 2020, the company announced that number of live sporting events had been impacted due to Coronavirus outbreak.  The Group reported that approximately 45 per cent of its NGR was generated from sporting events.

Financial Highlights – Financial Year 2019

(Source: Annual Report, Company Website)

For the financial year ending 31st December 2019, the group’s revenue increased to GBP 3,600.5 million as against GBP 2,935.2 million in FY2018. The Underlying EBITDA stood at GBP 761.1 million in FY2019 versus GBP 640.8 million in FY2018. The underlying PBT (Profit before tax) stood at GBP 535.8 million in FY2019 versus GBP 434.6 million in FY2018. The group reported a loss after tax of GBP 140.7 million in FY2019 versus a loss after tax of GBP 56.4 million in FY2018. The total dividend stood at 35.2 pence in FY2019 versus 32 pence in FY2018.

Share Price Performance  

Daily Chart as on 3^rd April 2020, before the market closed (Source: Thomson Reuters)

On April 3, 2020, at the time of writing (before the market close, at 8:44 AM GMT), GVC Holdings Plc were trading at GBX 471.90, up by 4.8 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 956.80/GBX 292.70. 

Valuation Methodology

*Peers: Cineworld Group Plc, FirstGroup Plc, Gamesys Group Plc, 888 Holdings Plc, Whitbread Plc and Compass Group Plc

Conclusion
The company has shown a decline in financial performance for the financial year 2019. The revenue has increased, while the bottom-line performance has declined for the period. The online gaming market in which the group operates is continuously evolving that too at a rapid pace and is full of growth opportunities. In the medium term, the company is targeting double-digit revenue growth from its online business through M&A activity and underlying market growth. The group is looking forward to international expansion through organic and non-organic growth.

Over the course of 4 years (FY15 - FY19), the company’s revenue surged from GBP 180 million in FY15 to GBP 3,600.50 million in FY19. Compounded annual growth rate (CAGR) stood at 11.48 per cent.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “BUY” recommendation at the current price of GBX 439.20 (as on 3rd April 2020, before the market close at 8:02 AM GMT), with lower double-digit upside potential based on 8.29x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).

National Express Group Plc (LON: NEX)

Business Overview
National Express Group Plc is a Birmingham, United Kingdom-based transport provider delivering services company, which operates in the UK, North Africa, the Middle East, Continental Europe, and North America.

Recent News
On 2^nd April 2020, the company announced that Matt Ashley would resign as Business Development Director of the Group on 3 April 2020.

COVID-19 Update
On 19th March 2020, National Express Group released an update on the impact of COVID-19 and actions taken by the management to tackle it. The group’s priority during the period is to protect its colleagues, business and customers while following the advice and guidelines of the government. The group expect positive and small cash flow in the next few months based on contract structures and management actions. The group witnessed a decline in the passenger numbers and taking measures to protect cash flows and reduce its cost base. The company is working closely with local governments and contracting authorities to maintain some cash flows during the disruption period. In the first two months of FY2020, driven by an increase in the revenue from multiple businesses, the group’s revenue increased by 17 per cent versus the same period of FY2019. The group is focused on fixing its borrowing facilities of over GBP 1.3 billion and will reach this level in approximately the next 18 months period. The current undrawn amount stood around GBP 500 million. The company is in talks with the banking group for short-term facilities if the market conditions worsen further.

Share Price Performance  

Daily Chart as on 3^rdApril 2020, before the market closed (Source: Thomson Reuters)

On April 2, 2020, at the time of writing (before the market close, at 8:44 AM GMT), National Express Group Plc were trading at GBX 185.70, down by 4.38 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 485/GBX 66.30. 

Conclusion
During the key summer period, the company has delivered another strong performance. ALSA is on-track, and the UK coach business increased too. ALSA is also driving operational excellence and providing a growth platform for the group. North America business had shown robust growth, boosted by consistent performance and the WeDriveU acquisition. The group recorded decent performance in the financial year 2019, driven by organic growth in all divisions, and the recorded performance was ahead of the group's expectations. The group’s performance was negatively impacted by the outbreak of COVID-19. To tackle the outbreak, the company is taking necessary actions to reduce its operating costs and is in talk with the banking group for short-term facilities if the market conditions worsen further.

Based on the above rationale, we have given a “HOLD" recommendation at the closing price of GBX 177.90 (as on 2^nd April 2020).
 
*All forecasted figures and information have been taken from Thomson Reuters.     

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