National Express Group Plc - Leading Transport Provider with Strong Business Model

National Express Group Plc (LON: NEX) is a Birmingham, United Kingdom-based transport service provider, which operates in the UK, North Africa, the Middle East, Continental Europe, and North America.

Trading Update for April 2020 in line with Management Expectations
On 15^th May 2020, National Express Group released an update on the trading performance for the month of April 2020. The revenue for April 2020 stood at approximately 50 per cent versus revenue of April in the financial year 2019 and stood as forecasted and provided to investors. The group managed to reduce its costs by approximately GBP 100 million and received support from its customers and governments. The group managed to generate positive EBITDA and stood at ahead of expected figures. NEX had a strong cash collection in April and resulted in positive cash flow ahead of management’s expectations. The company updated its liquidity position and have approximately GBP 1.5 billion of undrawn committed facilities and cash balance. The group also made some positive developments in its key markets as it moves out of lockdown. The company won the school bus contract in North America with a duration of 5 years and had started start-up discussions for return to service with school districts. In Quebec region in Canada, the group witnessed 80 per cent of students registered for school buses. In Spain and Morocco, as the lockdown is removed NEX expect demand to increase in the coming weeks in both countries. In the UK, the group has started selling tickets for a coach for re-start on 1^st July as per the guidance and advice of the government.

Share Price Performance

Daily Chart as of May 15^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

National Express Group Plc shares were trading at GBX 198.70 at the time of writing before the market close (at 2:27 PM GMT+1) on 15^th May 2020 and up by 9.06% versus the previous day closing price. Stock's 52 weeks High is GBX 485.00 and Low is GBX 66.30.

Valuation Methodology


Growth Catalysts
The group is focused on accelerating its cost savings and restructuring plan to offset the impact due to the uncertain environment. The group, through strategic initiatives and investments, has resulted in improved efficiency and effectiveness.

Conclusion
During the key summer period, the company has delivered another strong performance. In the month of April, the group has shown positive EBITDA and further upgrades its liquidity position. ALSA is on-track, and the UK coach business increased too. ALSA is also driving operational excellence and providing a growth platform for the group. North America business had shown robust growth, and the group expect demand to increase in the coming weeks from Spain and Morocco as the lockdown is removed. The group recorded decent performance in the financial year 2019, driven by organic growth in all divisions, and the recorded performance was ahead of the group's expectations. The group’s performance was negatively impacted by the outbreak of COVID-19. To tackle the outbreak, the company is taking necessary actions to reduce its operating costs and is in talks with the banking group for short-term facilities if the market conditions worsen further.

Based on the decent prospects, which are supported by valuation done using the above method, we have given a “Buy” recommendation at the closing price of GBX 182.20 (as on 14^th May 2020), with lower double-digit upside potential based 24.50x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).

William Hill Plc – Trusted Gaming and Sports Betting Brand with Global Operations

William Hill Plc (LON: WMH) is a London, United Kingdom-based company, which is engaged in the gaming and betting business. The company is differentiated into three business, namely online, William Hill US, and retail.

Trading Statement for 17 Weeks Period with Impact of Covid-19
On 15^th May 2020, William Hill released an update on the trading for the period for 17 weeks ending 28^th April 2020 and the impact of coronavirus outbreak on business performance. The group is focused on ensuring the health and wellbeing of employees and customers to support business continuity. The company has taken all required steps to reduce the cost base, preserve cash and minimise cash outflow to achieve its long-term growth opportunities. Reflecting strong growth in gaming along with product enhancements through continues investment, the group achieved robust performance in International markets. To maintain the social distancing and absence of live sport led to the closure of retail estates in the United States and the United Kingdom, which resulted in a material impact on business performance. The covenants related to RCF (Revolving Credit Facility) has been waived for FY2020 and reset for FY2021, which resulted in excess liquidity of GBP 700 million and reduced cash burn to around GBP 15 million every month. The company is well-positioned to drive maximum benefit as the live sporting events resume.

Share Price Performance

Daily Chart as of May 15^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

William Hill Plc shares were trading at GBX 114.30 at the time of writing before the market close (at 2:35 PM GMT+1) on 15^th May 2020 and up by 7.07% versus the previous day closing price. Stock's 52 weeks High is GBX 206.80 and Low is GBX 28.63.

Valuation Methodology


*Peers: GVC Holdings Plc, J D Wetherspoon Plc, Playtech Plc, Whitebread Plc and 888 Holdings Plc.

Key Risks
Macro external factors such as the emerging risk of infectious diseases and political and economic disruption. Due to COVID-19, they postpone or cancel sporting events and close US casino will reduce the upcoming revenue and profit.

Conclusion
The group has made decent progress on several fronts, including the US business, Retail business, and Online business. The group has shown strong performance in the international markets. The company’s business in the US and the UK was materially impacted by the absence of live sport and maintaining social distancing. In the financial year 2019, both the top-line and the Bottom-line performance have declined, while the dividend per share declined. As the company operates in multiple geographies, its profits can be impacted negatively due to foreign exchange rate fluctuations. In the future, environmental regulations, foreign exchange risks and expansion by competitors could affect its business operations.

Based on the headwinds faced by the group and uncertainties in near-term due to Covid-19 pandemic, we have given a "WATCH" recommendation at the current price of GBX 117.68 (as on 15^th May 2020, before the market close at 8:55 AM GMT+1), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.
*The “Buy” recommendation is valid for the current price as covered in the report (as on 15^th May 2020).

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