The City of London Investment Trust Plc

The City of London Investment Trust Plc (LON: CTY) is an investment trust company operating with an objective to provide growth in capital and income through investment in the London Stock Exchange-listed equities.

Financial Highlights – H1 Financial Year 2020 (31st December 2019, GBP, thousand)
In the first half of the financial year 2020, driven by higher revenue returns and a positive capital return for the period, the company reported gross revenue and capital gains of GBP 101,110 thousand versus reported gross revenue and capital losses of GBP 148,859 thousand in H1 FY2019. The company’s Net return before finance expenses and tax increased to GBP 98,082 thousand in H1 FY2020 from a Net loss before finance expenses and tax of GBP 151,805 thousand in H1 FY2019. The company’s net return before tax stood at GBP 94,559 thousand in H1 FY2020 versus net loss before tax of GBP 155,480 thousand in H1 FY2019. The company’s net return after tax stood at GBP 94,139 thousand in H1 FY2020 versus net loss after tax of GBP 155,861 thousand in H1 FY2019. The return per share stood at 24.45 pence in the first half of the financial year 2020 versus a loss per share of 43.59 pence in H1 FY2019.

Share Price Performance

Daily Chart as of April6^th, 2020, after the market close (Source: Thomson Reuters)

The City of London Investment Trust Plc shares were trading at GBX 320.00 at the time of writing after the market close on 6^th April 2020. Stock's 52 weeks High is GBX 448.50 and Low is GBX 269.00.

Key Risks
The market conditions in which the company operates is full of challenges and might impact the operation performance and reduce financial performance as well.Changes in government policy, laws and regulation could affect the revenue and profitability of the company. 

Conclusion
The company has shown an increase in financial performance in the first half of the financial year 2020. Both the top-line and the bottom-line performance have improved significantly, with positive capital returns. The company believe that with Brexit settlement, the business will improve and boost the confidence of the consumers. The future trading relationships between EU and UK remained unclear which, may result in an optimistic outlook. The global economy, with effects of Coronavirus, is expected to be flat or dull. With the outbreak of Covid-19, many countries have imposed restrictions on travel and resulted in a sharp fall in the stock markets globally. The Covid-19 has increased volatility and reduced the liquidity, which has resulted in a decline of stock’s value.

Therefore, considering the ongoing challenges in the UK’s market and uncertainties in near-term due to Covid-19 pandemic, we have given a “Watch” recommendation at the closing price of GBX 320.00 (as on 6^th April 2020), while we look for any upcoming catalysts in the near term.

Valeura Energy Inc

Valeura Energy Inc (LON: VLU) is a Canada-based upstream natural gas producer which focuses on exploring, developing and producing natural gas and condensate in Turkey, which is sold directly to the customers in the immediate vicinity. The company is also listed on the Toronto Stock Exchange. The group is focused on appraising and developing a deeper unconventional gas play and produces natural gas from conventional shallow accumulations in the Thrace Basin.

Recent News
On 6^th April 2020, Valeura Energy announced the increase in working interest in the exploration licenses for exploration licenses West Thrace to 63 per cent and the Banarli to 100 per cent. The group also re-affirms commitment to evaluation of deep gas play alternative.

Financial Highlights – Financial year 2019 (31^st December 2019, USD, thousand)

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, driven by an increase in the revenue from petroleum and natural gas sales for the period, the group’s total revenue increased to USD 10,525 thousand as against USD 9,729 thousand in the financial year 2018. Due to an increase in the operating and non-operating expenses for the period, the group reported an LBT (loss before tax) of USD 4,346 thousand in the financial year 2019 versus an LBT (loss before tax) of USD 4,821 thousand in the financial year 2018. The net loss for the financial year 2019 stood at USD 4,815 thousand versus a net loss of USD 5,519 thousand in the financial year 2018. The basic and diluted loss per share stood at 0.06 cents in the financial year 2019 versus a basic and diluted loss per share of 0.07 cents in the financial year 2018. The cash balance stood at USD 36,111 thousand as on 31^st December 2019 versus USD 45,993 thousand as on 31^st December 2018. The total assets stood at USD 81,663 thousand as on 31^st December 2019 versus USD 94,614 thousand as on 31^st December 2018.

Share Price Performance

Daily Chart as of April6^th, 2020, after the market close (Source: Thomson Reuters)

Valeura Energy Inc shares were trading at GBX 16.50 at the time of writing after the market close on 6^th April 2020. Stock's 52 weeks High is GBX 207.00 and Low is GBX 12.00.

Key Risks
The market conditions in which the company operates is full of challenges and might impact the operation performance and reduce financial performance as well. Any change in regulations and government policies could affect the overall business of the company.Risks related to environment and climate change could hamper the operations of the company. Liquidity and interest rate risks, which could affect the operations of the company.

Conclusion
The group has shown an increase in the financial performance for the financial year 2019. Both the top-line and the bottom-line performance has improved,while the profitability remained in the negative zone for the period. The financials of the group are substantially dependent on prevailing prices of oil and gas, which are out of the control of the group and are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and gas. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. With the outbreak of Covid-19, many countries have imposed restrictions on travel and resulted in a sharp fall in the stock markets globally.

Keeping in mind the risks faced by the company, investors are recommended to “AVOID” taking fresh positions at the closing price of GBX 16.50 (as on 6^th April 2020).

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