Midwich Group Plc

Midwich Group Plc (LON: MIDW) is a Support Services company providing solutions related to document and audio-visual (AV) distribution to the trade market.

Financial Highlights – Financial Year 2019 (31^st December 2019, GBP, million)

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, the company’s revenue increased by 19.6 per cent to £686.2 million from £573.7 million in the financial year 2018. The increase in the revenue was mainly driven by an increase in revenue from Continental Europe and the Asia Pacific businesses for the period. The group’s adjusted operating profit was at £33.5 million in FY2019 versus £30.3 million in FY2018, an increase of 10.6 per cent for the period. The group’s adjusted PBT (Profit before Tax) was at £31.2 million in FY2019 versus £28.9 million in FY2018, an increase of 8 per cent for the period. The group’s statutory PBT (Profit before Tax) increased by 13.1 per cent to £23.8 million in FY2019 versus £21 million in FY2018. The group’s statutory PAT (Profit after Tax) increased by 19.3 per cent to £18.2 million in FY2019 versus £15.3 million in FY2018. The company’s statutory basic earnings per share stood at 21.67 pence in FY2019 as against 18.50 pence in FY2018. 
 
Share Price Performance


Daily Chart as of March 20^th, 2020, before the market close (Source: Thomson Reuters)

Midwich Group Plc shares were trading at GBX 419.00 at the time of writing before the market close (at 11:35 AM GMT) on 20^th March 2020 and down by 0.24% versus the previous day closing price. Stock's 52 weeks High is GBX 640.00 and Low is GBX 381.00.

Valuation Methodology

*Peers: Renishaw Plc, Oxford Instruments Plc, TT electronics Plc and Electrocomponents Plc.
 
Conclusion
The company has shown decent financial performance in the financial year 2019. Both the revenue and profitability has improved for the period. The revenue from all the territories in which the company operates has increased for the period. The negative sentiments in the global economy are created due to US/China trade war, political changes in certain locations and outbreak of COVID-19; however, the market in which company operates had shown good performance in the past in challenging economic scenarios. The company is also looking forward to growing further through acquisitions, which would help in enhancing its capabilities and increase its global reach.
Based on the above rationale and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the current price of GBX 410.00 (as on 20th March 2020, before the market close at 8:30 AM GMT), with lower double-digit upside potential, based on 15.20x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).

 

Vianet Group Plc

Vianet Group Plc (LON: VNET) is a technology service provider that offers business insights through the internet of things (IoT). 

Financial Highlights – H1 Financial Year 2020 (30^th September 2019, GBP, thousand)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2020, the company’s reported revenue surged by 9.5 per cent to £8.41 million versus £7.68 million in H1 FY2019. The increase in the revenue was driven byincreased sales from smart zones and smart machines for the period. Operating profit pre-amortisation of intangibles share options, and exceptional costs were up by 51.5 per cent to £2.56 million in H1 FY2020 against the £1.69 million in H1 FY2019. The PBT (profit before tax) from continuing operations stood at £1,771 thousand in H1 FY2020 versus £993 thousand in the first half of the financial year 2019. The PBT (profit before tax) stood at £1,689 thousand in H1 FY2020 versus £849 thousand in the first half of the financial year 2019. The basic earnings per share stood at 6 pence in H1 FY2020 versus 3.05 pence in H1 FY2019. The diluted earnings per share stood at 5.97 pence in H1 FY2020 versus 3.02 pence in H1 FY2019.

Share Price Performance

Daily Chart as of March 20^th, 2020, before the market close (Source: Thomson Reuters)

Vianet Group Plc shares were trading at GBX 75.00 at the time of writing before the market close (at 11:42 AM GMT) on 20^th March 2020 and up by 1.35% versus the previous day closing price. Stock's 52 weeks High is GBX 169.75 and Low is GBX 72.00.

Valuation Methodology

*Peers: Windar Photonics PLC, Vectron Systems AG and Spectra Systems Corp.

Conclusion
The company had entered FY2020 with solid momentum and is in good shape to deliver strong earnings growth and mainly focus on the exciting growth opportunities. In the geographical areas, the company is making sales investment to accelerate growth, with extra focus on developing the capability and contactless payment device connectivity. The company is having decent cash flow and recurring income. With a robust balance sheet and operational cash generation capabilities, it allows the group to exploit further investment opportunities.

Based on the decent growth prospects and supported by the valuation as done above, we have given a “Speculative Buy” recommendation at the current price of GBX 70.00 (as on 20^th March 2020, before the market closed, GMT 1:22 PM) with lower double digit upside potential based on 8.59x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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