Barclays Plc (LON: BARC)

Business Overview
Barclays Plc is a London, United Kingdom-headquartered transatlantic Consumer, Corporate and Investment Bank which offers products and services across wealth management, credit cards, personal, corporate and investment banking, with a focus on increasing cash returns to shareholders and improving its return on tangible equity on a sustainable basis. The operations of the group are differentiated in three operating segments, namely Barclays UK, Barclays International and Head Office.

Recent News
On 13^th February 2020, the company announced that the FCA and the Prudential Regulation Authority commenced an investigation into one of the directors of the company. Mr. Jes Staley accused for characterisation to the company of his relationship with Mr. Epstein and the proper description of that relationship in the company's response to the FCA.

Financial Highlights - Financial Year 2019 (31^st December 2019, GBP, million)


In the fiscal year 2019, the company’s total income grew by 2 per cent to GBP 21.6 billion as compared to GBP 21.1 billion in the fiscal year 2018. Net operating income during the period was GBP 19.7 billion. Total operating expenses of the company declined by 5 per cent to GBP 15.4 billion as compared to GBP 16.2 billion in the fiscal year 2018. Profit before tax was GBP 4.35 billion against GBP 3.5 billion in fiscal year 2018. Profit after tax during the period increased by 30 per cent to GBP 3.35 billion versus GBP 2.58 billion in FY2018. Attributable profit was up by 54 per cent to GBP 2.46 billion in FY2019 as compared to GBP 1.6 billion in the fiscal year 2018.

Share Price Performance

Daily Chart as on 13^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 13^th, 2020, Barclays Plc shares were trading at GBX 174.50 at the time of writing before the market close (at 12:02 PM GMT), down by 2.70 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 192.99/GBX 131.04. The stock price has given10.57 per cent returns during the previous year. In the last three months, the stock price has given 2.71 per cent returns.

Conclusion
The company has reported a decent financial performance in the fiscal year 2019. The company has reduced its cost which resulted in an increase in net profit margins. Barclays has a diversified consumer and wholesale businesses, across geographies with different currencies which helps the Group deliver year-on-year improvements in profitability during a period of macroeconomic uncertainty. The diversified customer base of customers plays a critical role in the growth of the bank. The low interest rate environment could become challenging to the company’s growth. The bank is planning to increase its customer reach and enhance its market position. The company focus is to accelerate its digital journey and continue to play a leading role in capturing innovation and bringing it to life, at scale, for millions of customers and clients. In this way, the bank would enhance its growth in areas that are less capital intensive, further diversifying the Group. The company continue to believe that it is appropriate to target a return greater than 10%, and they are managing their business to achieve that.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 172.50 (as on 13^th February 2020 before the market close at 8:00 AM GMT).

Great Portland Estates Plc (LON: GPOR)

Business Overview
Great Portland Estates Plc is a London-headquartered property investment and development company which seeks to deliver value by unlocking the potential in central London commercial real estate to deliver long-term outperformance across the property cycle.

Recent News
On 6^th February 2020, the company announced that it has signed a GBP 450 million ESG-linked unsecured RCF contract at a headline margin of 90 basis points over LIBOR with a group of five existing relationship banks.

Trading Statement (31^st December 2019)


In the third quarter of the fiscal year 2020, twelve new lettings (48,900 sq ft) generating annual rent of GBP 3.7 million (the company’s share: GBP 3.5 million) were signed as compared to 17 new leases and renewals completed in the second quarter of the fiscal year 2020. Rent per square ft. also declined in the Q3 FY2020 to GBP 53 from GBP 78 in the Q2 FY2020. In Q3 FY2020, one rent review was settled securing GBP 0.1 million of annual rent. Total space covered by new lettings was 50,100 sq ft. The company’s leasing successes have helped maintained a low vacancy rate of 2.4% at 31 December 2019 as compared to 2.3 per cent at 30 September 2019.

Share Price Performance

Daily Chart as on 13^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 13^th, 2020, Great Portland Estates Plc shares were trading at GBX 940.60 at the time of writing before the market close (at 1:50 PM GMT), down by 0.61 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 955.40/GBX 643.80. The stock price has given30.24 per cent returns during the previous year. In the last three months, the stock price has given 22.47 per cent returns and now some profit booking is expected in the stock.

Valuation Methodology

*Peers: Segro Plc, Derwent London PlcShaftesbury Plc, Urban&Civic Plc, Unite Group Plc and Helical Plc

Conclusion
The company has reported a decent operational performance in the third quarter of the fiscal year 2020. The company has made good progress at its six developments and continued capital discipline. The clear outcome of the General Election is encouraging, and it would increase transaction activity in its investment markets. The Group is focusing on innovation across its portfolio. The pipeline opportunities of the company providenearly 1.4 million sq ft of value creating opportunities. However, the group’s debt level soared up substantially, which has heightened the group’s balance sheet as well. Weakening macroeconomic environment for property investment has resulted from the combination of ongoing political uncertainty and low economic growth around the world, which might result in a decline in the property valuations, with increased property yields and reduced occupier demand for space. Being a global hub, the long-term prospects of London market still seem to be bright, but the current political impasse has reduced transaction activity in recent months, especially in the investment market, as investors are reluctant to make investment decisions whilst outcomes remain uncertain.

Based on the valuation and factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the current price of GBX 954.80 (as on 13th February 2020 before the market close at 9:04 AM GMT), with support from few catalysts needs to be evaluated at a later stage. 
 
 
*All forecasted figures and information have been taken from Thomson Reuters.

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