Ocado Group PLC

United Kingdom-based Ocado Group Plc (LON: OCDO) is an online grocery retailer company. It develops end to end operating solution, using its technology for online grocery retail. The company’s objective is to transmute online grocery via automation and cutting-edge technology. The group has introduced the Ocado Smart Platform (OSD). For operating online grocery businesses, this platform is the world-class suite of solutions.

On 19^th March 2020, the company will announce its first-quarter trading statement.

Financial Highlights (for the weeks ended 1 December 2019, £ million)

(Source: Final Results, Company Filings, LSE)

In the financial year 2019, the company’s retail revenue increased by 10.3% to £1,617.5 million as compared with the previous year (FY18 re-presented: £1,466.6 million). The retail revenue is also making Ocado Retail the fastest-growing grocer in the United Kingdom, despite capacity lost with Andover fire. In an International Solutions partners, the Fees invoiced amounted to £81.4 million, an increase of more than 38%, bringing the total unrecognised fees of approximately £140 million by the end of the year. The group EBITDA for the 52 weeks ended 1 December 2019 stood at £43.3 million, reflecting the combined effects of the Andover fire, the adoption of IFRS 16, and the costs of share schemes, broadly in line with anticipations. The loss before tax increased to £214.5 million in FY19 against the prior period (FY18 loss of £44.4 million). The company’s funding position bolstered to £751 million. For the financial year 2019, the capital expenditure increased to £259.9 million, and net cash also surged to £142.4 million. In the current period, the company has not declared any dividend.

Share Price Performance

Daily Chart as at February-11-20, before the market closed (Source: Thomson Reuters)

Ocado Group PLC at shares were trading at GBX 1,214.5 the time of writing before the market close (at 8:15 AM GMT) on 11^th February 2020 and were down by 0.205% versus the previous day closing price. Stock 52 weeks High and Low are GBX 1,440.50/GBX 875.00. The group’s stock is reflecting the higher volatility as against the benchmark index based on the company’s beta of 1.21.On a year to date basis, the stock price has given negative 5.20 per cent returns (approx.).

Conclusion
In the upcoming period, the company’s retail revenue growth will be in the range of 10%-15%. The revenue from International Solutions is expected to be lower than £10 million. In International Solutions, the fees invoiced is expected to be 40% or more. The EBITDA from UK Solutions & Logistics division and International Solutions division are expected to decline with an uptick in the retail business.  The total group’s capital expenditure is expected to be approximately 600 million pounds. The group continue to target further Solutions deals which would generate further cash fees but would negatively impact short term profits. However, the company’s business is facing some uncertainties which could affect the performance of the company.

Based on the above rationale and risks faced by the company, we have given a “Watch” recommendation at the closing price of GBX 1,217 (as on February 10, 2020), while we look for the growth catalysts in the near-term.
 

Diurnal Group PLC

Diurnal Group PLC (LON: DNL) is a United Kingdom-based global pharmaceutical company, which developed high-quality products for the life-long treatment of chronic endocrine conditions, including Adrenal Insufficiency (AI) and Congenital Adrenal Hyperplasia (CAH). It was founded in 2004. Its innovative and expertise research activities emphasis on circadian-based endocrinology to chronic endocrine disease arena and yield novel product candidates in the rare.

Financial Highlights (for the six months ended 31 December 2019)
For the current period, the total revenue increased to £1.1 million as compared with the corresponding period of the last year (H1 FY19: £0.2 million). The robust growth in revenues reflects both continued growth in the UK and Germany, where Alkindi® was introduced in May 2018 and September 2018 respectively, as well as sales from new launches in Sweden, Iceland, Austria, and Denmark. In the first half of 2020, the operating loss decreased by 53% to £4.6 million against the same period last year, reflecting increase in revenues and declined investment in clinical development expenses. On 31^st December 2019, the cash and cash equivalents stood at £4.6 million, a decrease from the previous period (30 June 2019: £9.1 million). During the period, the company has launched several products in different regions.

Share Price Performance
 
Daily Chart as at February-11-20, before the market closed (Source: Thomson Reuters)

Diurnal Group PLC shares were trading at GBX 25 the time of writing before the market close (at 9:33 AM GMT) on 11^th February 2020 and remained the same against the previous day closing price. Stock 52 weeks High and Low are GBX 47.00/GBX 22.78. The group’s stock is reflecting the higher volatility as against the benchmark index based on the company’s beta of 2.53. On a year to date basis, the stock price has given negative 10.71 per cent returns (approx.).

Conclusion
If approved by the EMA (European Medicines Agency), Chronocort® will join Alkindi® in the company's portfolio of approved products, enlarging the Diurnal's commercial cortisol replacement therapy franchise. For Alkindi®, the group also anticipates additional progress, with further launches scheduled in 2020 to hasten the growth of revenues.

As per the currently planned expenditure, the company anticipates its cash resources to last at least to the third quarter of 2020. From the Operational Review, the group is urged by the United States interest in its late-stage pipeline, which delivers an opportunity to generate non-dilutive income, including development cost funding, milestone payments, and potential for signature fees. Diurnal Group PLC is also assessing opportunities for both non-equity and equity financing, in order to further extend its cash resources.

Currently, the stock is trading near the 52-week low, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level. In the future, environmental regulations, foreign exchange risks and expansion by competitors could affect its business operations.

From the technical standpoint, the Moving average convergence divergence is falling, with the gap between 12-day exponential moving average and 26-day exponential moving average is expanding, an unfavourable trend. Also, at the present traded level, its shares were quoted below its 5-day, 10-day, and 20-day SMAs, again an unfavourable trend in the stock.

Based on the above rationale, we have given a “Watch” recommendation at the current price of GBX 29 (as on February 11, 2020, before the market close at 8:15 AM GMT), while we look for the growth catalysts in the near-term.

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