N Brown Group Plc

N Brown Group Plc (LON: BWNG) is a Manchester, United Kingdom-headquartered digital fashion retailer, which designs, sources and creates own-range and branded fashion and homewares and focuses on catering underserved customer groups, and operates a trusted family of retail brands, focused on fashion that fits.

The group will announce its full-year results on 29^th April 2020.

Trading Update (as on 23^rd March 2020)
On 23^rd March 2020, N Brown Group released an update for the trading performance and impact of COVID-19. The group is focused on ensuring the safety of its employees and customers. At this stage, the company is unable to predict the virus impact on its sales and how long it lasts, with a change in the behaviour of consumers. The first two weeks trading in the financial year 2020 remained in line with forecasts, and in last week the group faced a decline in demand from customers. The daily product salesdeclined by over 40 per cent as compared to the expected values and expect demand to reduce further throughout the financial year 2021.The company has taken the necessary steps to reduce its expenditure to preserve the liquidityof the business. The company is exploring all options to support packageswith the Bankand Governmentof England.The group’s financing facilitiesstood at GBP 652.5 million, which include securitisation facility, revolving credit facilityand an overdraft. The company is reviewing the impact of COVID-19 on its bad debt provisionand expect its adjusted profit before tax to be lower than the previously guided range in FY2020.

Share Price Performance
 

Daily Chart as of March 25^th, 2020, before the market close (Source: Thomson Reuters)

N Brown Group Plc shares were trading at GBX 19.20 at the time of writing before the market close (at 1:35 PM GMT) on 25^th March 2020 and up by 16.36% versus the previous day closing price. Stock's 52 weeks High is GBX 163.90 and Low is GBX 15.32.

Valuation Methodology

*Peers: Lookers Plc, Ted Baker Plc, Next Plc and Superdry Plc.

Conclusion
In the last few months, the Group is going through changes in higher management, changes in directors which could be the beginning of new strategies and initiatives. The company operates in a competitive industry, and excessive competition could impact the profitability of the company.  In the latest trading update, N Brown Group Plc has witnessed a revenue growth in its digital segment. The Group is making good progress with its ongoing strategic review, which would benefit in the cost reduction and improve the business. The group continue to monitor the impact of COVID-19 and will take decisions to safeguard the interest of shareholders. The company is exploring all options to support packageswith the Bankand Governmentof England.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 16.50 (as on 24^th March 2020) with lower double-digit upside potential based on 1.15x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.)

Tekmar Group Plc

Tekmar Group Plc (LON: TGP) is a UK based company provider of flexible pipe protection systems, engineering services, subsea cable and umbilical cords. 

The group will announce its full-year results in July 2020.

Trading Statement and the impact of Coronavirus (as on 18th February 2020)
The outbreak of coronavirus is affecting the Group's performance and travelling restriction in China could worsen the situation for the company.  The company expected that its earnings in the financial year 2020 would be broadly in line with those achieved in the financial year 2019. China accounted for 10 per cent of the total revenue forecast in FY20. It also accounted for 20 per cent of the company’s outstanding supply-chain commitments. The Group is not yet able to evaluate the full impact of the virus on FY21, and it is expected that the company would report that in the near future.

Share Price Performance

Daily Chart as of March 25^th, 2020, before the market close (Source: Thomson Reuters)

Tekmar Group Plc shares were trading at GBX 94.9999 at the time of writing before the market close (at 1:43 PM GMT) on 25^th March 2020 and up by 5.56% versus the previous day closing price. Stock's 52 weeks High is GBX 185.00 and Low is GBX 90.00.

Valuation Methodology

*Peers: Pressure Technologies Plc, Enteq Upstream Plc, Schlumberger NV and Rosetti Marino Spa.

Conclusion
The company had shown decent financial performance in the first half of the financial year 2020. There had been an increase in both top-line and bottom-line performance. The recent outbreak of coronavirus in China could hamper the business and growth of the company. The company is well-positioned to grab maximum opportunity from the strong growth in the offshore wind market globally. The company’s balance sheet is robust for the current period. The company had established an entity in China to expand its operations internationally.

Based on the decent growth prospects of the company and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 90.00 (as on 24th March 2020) with single-digit upside potential based on 17.30x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.
 *The “Speculative Buy” recommendation is valid for the current price as covered in the report (as on 25^th March 2020).

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