Assura PLC

United Kingdom-based Assura PLC (AGR) is a healthcare REIT (real estate investment trust) company. The group is an investor and developer of primary care property. The company trades at the London Stock Exchange and is a part of the FTSE 250 index. Portfolio of properties is around 560, investment property value of approximately £2,039 million, and has an employee base of around 67.

Financial Highlights (for the six months ended 30 September 2019, £million)

(Source: Interim Reports, Company Website)

In the first half of the financial year 2020, the company’s net rental income increased by 10 per cent to £50.6 millionas compared with the corresponding period of the last year, while rent roll growth of 1.7 per cent to £104.4 million in H1 FY20. During the current period, the company had successfully concluded 148 rent reviews and generated a weighted average annual rent surge of 2.04 per cent on those properties. The profit before tax decreased by 2.7 per cent to £36.4 millionagainst £37.4 million in H1 FY19, driven by the lower revaluation gains. EPRA (European Public Real Estate Association) earnings per share for the H1 FY20 stood at 1.4 pence, an increase of 7.7 per cent against the 1.3 pence in H1 FY19. In the six months to 30 September 2019, the total dividends settled were 1.4 pence per share or £32.8 million, an increase of 8 per cent from the previous year same period data. In September 2019, the property portfolio increased by 3 per cent to £2,039 million as compared to the previous period (March 2019: £1,979 million), due to the acquisitions and developments, while EPRA NAV surged by 0.2 pence to 53.5 pence in September 2019. In H1 FY20, the loan to value ratio increased by 2ppts to 36 per cent against the previous period (March 2019: 34 per cent). On 30^th September 2019, the weighted average cost of debt was reported at 36 per cent.

Share Price Performance

Daily Chart as at November-12-19, before the market closed (Source: Thomson Reuters)

On 12^th November 2019, Assura PLC shares were trading at GBX 72.30 at the time of writing before the market close (at 8:20 AM GMT), down by 0.413% against the previous day closing price. Stock's 52 weeks High and Low are GBX 76/GBX 52.45. The company's stock beta was 0.30, reflecting the lower volatility as compared to the benchmark index.

Valuation Methodology


Conclusion
In a highly fragmented market, the company stays well positioned to become the NHS's partner of choice in the primary care property.The portfolio of 560 medical centres compares with a total United Kingdom market of around nine thousand, highlighting the company's decent prospects for additional growth. In August 2019, the company raised £107 million of unsecured debt. The company retain headroom for additional investment with a Loan to Value of 36 per cent, 3.16 per cent of average weighted interest rate and £310 million of available facilities. The company also has a decent pipeline of £72 million of development and £65 million of targeted acquisitions opportunities currently in legal hands. Looking ahead, the company will continue its work to deliver outstanding spaces for health services in the communities while also delivering decent long-term returns.

Political and economic uncertainty due to Brexitnegotiations could have a negative effect on the financials and target market of the company, along with the additional risk of competition from other property investors and change in the property valuations. Moreover, the company’s stock is trading near a 52-week high, raising doubts at its upside potential at the current price level.

Therefore, based on the above rationale, we have given a “Watch” recommendation at the closing price of GBX 72.60 (as on November 11, 2019), while we look for any upcoming catalysts in the near term.

CentralNic Group PLC

CentralNic Group Plc (CNIC) is a London, the United Kingdom-based developer and operator of software platforms, which owns one of the world's pioneering registry service providers, CentralNic Ltd. The company’s operations are differentiated in three operating segments: Reseller, Small Business and Corporations. Benjamin Crawford is the Chief Executive Officer of the group.

Financial Highlights (for the six months ended 30 June 2019)
Led by the successful acquisition of the three companies, and strong performance recorded by KeyDrive which was acquired in the previous financial year, took the company’s revenue to $49.7 million and recorded a massive surge of 225 per cent against $15.3 million reported in the year-ago period. Gross profit surged by 127 per cent to $19.73 million on a YoY basis.

On a YoY basis, the adjusted EBITDA surged by 203 per cent to $9.2 millionas compared with the corresponding period of the last year, driven by a combination of progress with the acquisition, and underlying organic growth of 6 per cent. In the first half of 2019, the operating profit rose by 266 per cent to $2.4 million against a loss of $1.4 million in H1 FY18. However, loss after tax jumped by 100% to $2.99 million from $1.49 million reported in the H1 FY18, on account of steep escalation of net finance cost to $4.02 million from $0.47 million in the year-ago period. Basic loss per share expanded by 13 per cent to 1.75 cents against the loss per share of 1.55 cents in H1 FY18, while adjusted earnings per share surged by 34 per cent to 4.25 cents in H1 FY19.

In H1 FY19, the reported cash balance surged by 73 per cent to $17.9 million against the same period in 2018. The net debt for the first half of 2019 was reported at $6 million, a decrease of 47 per cent from the corresponding period of the last year.

Share Price Performance

Daily Chart as at November-12-19, before the market closed (Source: Thomson Reuters)

On 12^th November 2019, CentralNic Group Plc shares were trading at GBX 49.50 at the time of writing before the market close (at 8:15 AM GMT) and remained the same against the previous day closing price. Stock's 52 weeks High and Low are GBX 68.50/GBX 39. The company's stock beta was negative 0.97, reflecting the inverse volatility as compared to the benchmark index.

Key Risks
The company is exposed to deposit risk, credit risk, market risk, IT security, impact on society, foreign currency risk and other risks arising from financial instruments.

Conclusion
In the first half of the financial year 2019, the company recorded robust growth,which was largely driven by the successful acquisitions which the group had in the past and reflects the successful execution of the company's buy and build strategy. Also, the gross margin and adjusted EBITDA margin of the lately acquired businesses are improving, and management is confident of achieving a full-year growth as it was achieved in the first half of FY19.

These financial results not only show that the company can complete transformative acquisitions, but it can also assimilate them a good positionwhile continuing to provide organic progress. Moreover, the company scale up quickly; the underlying qualities of excellent cash conversion and high recurring revenues will help to improve the financial performance in the near term.

The pipeline of future strategic deals of the group remains strong. High debt burden might impact on the company’s balance sheet. The company is convinced in continuing the trajectory towards joining the ranks of the international leaders in the industry.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 49.50 (as on 11th November 2019). 
 
 
*All forecasted figures have been taken from Thomson Reuters

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