John Wood Group Plc (LON: WG.) – Resource Player with a Sustainable Business Model
John Wood Group Plc is a multinational energy services company based out of Aberdeen, Scotland, delivering technical, engineering and project services to energy and industrial markets.

On 30th June 2020, the company will release its trading update for the first half of 2020.

Covid-19 Update and Actions Taken to Mitigate the Risk (2nd April 2020)
On 2^nd April 2020, John Wood group released an update on the impact of Covid-19 on business performance and actions taken in response to the outbreak. The group ismaintaining a robust balance sheet foundation and liquidity, with USD 1.4 billion of headroom against the debt facilities and net debt to pre-IFRS 16 EBITDA was 2.0x as on 31st December 2019. Wood has access to financing facilities, which includes a revolving credit facility of $1.75 billion, bilateral term loans of $300 million, and US private placement debt of approximately $880 million. In February end, the order book was $8 billion before the recent fall in oil prices. The Board has decided to withdraw the final dividend recommendation.

Share Price Performance

Daily Chart as of April 28^th, 2020, after the market close (Source: Thomson Reuters)

John Wood Group Plc shares closed at GBX 175 on 28^th April 2020. Stock's 52 weeks High is GBX 560.80 and Low is GBX 100.90.

Growth Catalysts
The company expected decent growth in its underlying revenue and EBITDA based on the existing forecasts and order book in FY2020. The company is well-positioned to take benefits from growth trends across the energy and industrial markets. 

Conclusion
The Group has a proven track record of leveraging its flexible, asset-light model which could sail through challenging market conditions and the company has diversified end markets. The Group reported no direct impact from Covid-19 till date. Higher activity levels across all business units along with a strong pipeline of opportunities and excellent progress on cost synergies augurs well for the company. The Group expect a modest growth rate in revenue and in underlying EBITDA based on the existing forecasts and order book data.

Over the course of 4 years (FY15 - FY19), the company’s revenue surged from USD 5,000.60 million in FY15 to USD 9,890.40 million in FY19. Compounded annual growth rate (CAGR) stood at 18.59 per cent.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 175 (as on 28^th April 2020).

IQE Plc (LON: IQE) - Recognised leading supplier of wafer services and advanced wafer products

IQE Plc is a Cardiff, United Kingdom-based designer and manufacturer of epiwafer products and supplier of advanced wafer products and wafer services to the semiconductor industry globally.

The group will announce its H1 results in September 2020.
Financial Highlights – Financial Year 2019 with Resilience for Short-Term and Growth for Long-Term

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, due to fall in demand from wireless customer for the period, the group revenue declined to GBP 140 million as against GBP 156.3 million in FY2018. The adjusted EBITDA stood at GBP 16.2 million in FY2019 versus GBP 26.4 million in FY2018. Due to an increase in the operating expenses, the company reported operating loss of GBP 18.8 million in FY2019 versus an operating profit of GBP 8.7 million in FY2018. The adjusted operating loss stood at GBP 4.7 million in FY2019 versus an adjusted operating profit of GBP 16 million in FY2018. Reflecting the decline in revenue and adjusted EBITDA, the company reported LAT (loss after-tax) of GBP 35.1 million in the financial year 2019 versus a PAT (Profit after tax) of GBP 1.2 million in FY2018. The company reported an adjusted diluted loss per share of GBP 2.46 pence in FY2019 versus adjusted earnings per share of 1.38 pence in FY2018.

Share Price Performance

Daily Chart as of April 28^th, 2020, after the market close (Source: Thomson Reuters)

IQE Plc shares closed at GBX 40 on 28^th April 2020. Stock's 52 weeks High is GBX 96.00 and Low is GBX 18.86.

Valuation Methodology

*Peers: Spirent Communications Plc, Softcat Plc, Micro Focus International Plc and Cyanconnode Holdings Plc.

Growth Catalysts
The market in which the company operates will continue to grow and expand in the future, to benefit from this expansion, the company actively looking for acquisitions.The company is looking forward to investment opportunities for growth in its core businesses.

Conclusion
2019 represented a challenging market in an unprecedented geopolitical context, but progress has been made to ensure the business is well-positioned for future growth opportunities. The company has closed the New Jersey (US) site but expanded in GaN capacity at Massachusetts (US) site. Singapore JV (CSDC) bought back under 100% ownership to tackle the Asian market opportunity and restructure cost base. The company also targeted cost reductions across the group completed. Credit facilities surged to £57 million (year-end net debt of £15-20m). The board is making good growth in driving the Group’s approach to improving profitability, with new technology introduction, specific responsibilities assigned for programs on operational execution, strong cost management, and revenue expansion through customer proximity and diversification. At present, the group has not able to quantify the impact of covid-19 and will be giving update once the situation gets clear.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 40.00 (as on 28^th April 2020).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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