Whitbread

Whitbread PLC (WTB) is a Dunstable, United Kingdom-headquartered multinational hotel and restaurant growing, with Premier Inn hotel chain among its portfolio. The company also operates restaurant brands, Brewers Fayre, Bar +Block, Beefeater and Table Table. The company is planning to grow its Premier Inn brand in Germany and will open more than 30 hotels by 2020/21, increasing from just two hotels at the moment. Across the UK, the company operates more than 72,000 rooms across 785 hotels.

Trading Update
In the first quarter of FY 2020, the company reported that due to weak trading conditions, UK total accommodation sales declined by 1.5%, while UK like-for-like sales declined by 4.6%. Food and beverage sales in the UK declined by 0.4%, while like-for-like sales decreased by 2.1%. The group also reported that another year of high industry cost inflation is being offset by the efficiency programme undertaken by the group. Domestic hotel demand has been impacted by the ongoing political and economic uncertainty in the UK, which has led to weaker business and leisure confidence.

Key Financial Highlights (FY 2019, in £m)
 
(Source: Company Filings)

Driven by the contribution of new hotel additions in the current financial year, the company’s reported revenue was up by 2.1 per cent to £2,049 million from £2,007 million in FY2018. The underlying profit before tax was up by 1.2 per cent to £438 million in FY2019 from £432 million in FY2018, reflecting ongoing efficiency programme and lower underlying net finance costs. Driven by £178 million of non-underlying items, statutory profit before tax decreased by 39.1 per cent to £260 million. The statutory profit for the year (continuing and discontinued) stood at £3,731 million in FY2019 against £436 million in FY2018. The reported basic earnings per share (continuing and discontinued) stood at 2,040.8 pence in FY2019 against 239.7 pence in FY2018. The operating cash flow declined by 7.1 per cent in FY2019 to £814 million from £877 million in FY2018. In FY2019, the company’s capex was up by £2 million to £557 million.

Valuation Methodology
Method:  Price/Earnings Approach (NTM)

*Peers of the company are Mitchells & Butlers PLC, Sodexo SA, InterContinental Hotels Group PLC, Elior Group SA, Accor SA, SSP Group PLC and Compass Group PLC

Share Price Commentary
 
Daily Chart as at 19-August-19, before the market closed (Source: Thomson Reuters)
 
On 19 August 2019, at the time of writing (before the market closed, GMT 4:35 pm), WTB shares were trading at GBX 4,121, down by 0.58 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 5,162.00/GBX 3,948. The company's stock beta was 0.92, reflecting roughly the same volatility as compared to the benchmark index. The total outstanding market capitalisation of the company was around £5.45 billion, with a dividend yield of 2.43%.

Conclusion
The company reported that the underperformance in the first quarter was due to a proportion of business customers and overexposure to the regions which have seen a sharp deterioration in business travel because of Brexit and fears of a downturn. The company remains mindful of potential slowdown until clarity in the macro-environment. However, the group has been successful in partially offsetting high industry inflation with the help of the efficiency programme undertaken by it, coupled with a robust business model. The group is confident of significant growth opportunities in the UK and internationally, though it remains cautious about short-term market conditions. Given the long-term structural opportunity, the group continues making an investment in UK & Germany, and German expansion was firmly on target, with 7,000 rooms in the pipeline.

Based on the above rationale and supported by valuation done using the above method, we have given a "HOLD" recommendation at the closing price of GBX 4,097.00 (as on 16 August 2019) based on 19.75x NTM Price/Earnings (approx.) on FY20E Earnings per share (approx.).
 

BATM Advanced Communications Ltd

BATM Advanced Communications Ltd (BVC) is an Israel-based technology company, engaged in providing real-time technologies, which are backed by substantial intellectual property and patents. The company was established in 1992 and develops, produces and markets medical products, as well as data communication products. Its two operating segments are Bio-Medical and Networking and Cyber. The Networking and Cyber division provides innovative telecom network solutions, focusing on advanced software and cybersecurity, while Bio-Medical division focuses on the provision and development of diagnostic laboratory services and equipment.

Recent Development
The company on 24 June 2019 announced its intention to raise $15 million via placement and direct subscription of new ordinary shares at a price of 42.5 pence to accelerate current network function virtualisation development projects with Arm as well as new product and use case development for 5G networks. The following day, the group announced that it had successfully raised $18 million from existing and new investors, and a total of 33,283,254 new ordinary shares were added to the share capital.

Key Financial Highlights (H1 FY 2019, $m)
Due to lower sales in the Networking and Cyber division, revenue for the first half of 2019 declined to $56.2m (H1 2018: $58.2m), while revenue was $58.4m on a constant currency basis. Gross profit for the period was reported at $15.3m (H1 2018: $16.5m). Reflecting the increased share in the revenue from the Bio-Medical division, the blended gross profit margin in the first half decreased to 27.3% (H1 2018: 28.3%). Due to a capital gain of $3.2m from the part realisation of the ownership of Ador, adjusted operating profit rose considerably to $1.6m ascompared with a loss in H1 2018 of $0.6m, while the company achieved an almost eight-fold rise in EBITDA to $3.9m (H1 2018: $0.5m). Profit for the period was $0.168 million, against a loss of $1.912 million H1 2018, which corresponded to a 140% rise in basic earnings per share to 0.14c (H1 2018: 0.35c loss). The company had effective liquidity of $16.9m at 30 June 2019 versus $24.4m at 31 December 2018, and cash outflow from operations was $2.0m for H1 2019 as compared to $0.8m outflow for the prior period.

Share Price Commentary

Daily Chart as at 19-August-19, before the market closed (Source: Thomson Reuters)
 
On 19 August 2019, at the time of writing (before the market closed, GMT 10:30 am), BVC shares were trading at GBX 42.03, down by 1.87% against the previous day’s closing price. Stock's 52 weeks High and Low is GBX 54.00/GBX 31.20. The company's stock beta was 0.12, reflecting considerably less volatility as compared to the benchmark index. Total outstanding market capitalisation was around GBP 186.15 million.

Conclusion
Even though revenue during the first half of 2019 was slightly lower than H1 2018, the company expects to deliver significantly higher revenue in the second half, backed by a substantially higher backlog and continued recovery in the Bio-Medical division. In line with the expectations of the company, gross margins are expected to improve in the second half. However, the operations of the group face some key risks, not least from diversified business aimed at emerging markets, which are subject to a higher political, legislative, and economic uncertainty. Any decrease in demand, which are less easy to predict in developing countries, may adversely affect the financials. The company is also subject to development risk inherent in the business activities pursued by the group.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 42.80 (as on 16 August 2019), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures and peers have been taken from Thomson Reuters.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.