Reckitt Benckiser Group PLC – Reflecting Sustainable Growth in Long Run
Slough, United Kingdom-based Reckitt Benckiser Group PLC (LON: RB.) is a consumer goods company with global operations. The group operates through two business segments - Health and Hygiene Home.

Q1 Trading Update (as on 30th April 2020) – Showing Good Progress and Strong Consumer Demand

(Source: Q1 Results, Company Website)

The company is reflecting robust consumer demand in March and April, with investing in capacity to meet growing demand.Due to robust demand for many of the health and hygiene products, the company’s reported revenue increased by 12.3% (up 13.3% on LFL basis and down 1% on FX basis) to £3,544 million in the first quarter of 2020. This increase was also driven by improved market share trends in both businesses.

Despite the challenging conditions in many markets, the company has seen strong demand in Q1 FY20 for Lysol, Nurofen, Dettol, VMS, and Mucinex. In e-Commerce, the net revenue was up by more than 50%, reflecting robust growth in both Health and Hygiene, mainly in March 2020 as consumers moved online during ‘stay at home’. RB Fight for Access Fund has allocated more than GBP 40 million to benefit communities consistent with the Group’s Purpose. Strategies to rejuvenate sustainable progress at the company underway with new structure expected to be in place by 1st July 2020.

Share Price Performance

Daily Chart as at April-30-20, before the market closed (Source: Refinitiv, Thomson Reuters)

Reckitt Benckiser Group PLC’s shares were trading at GBX 6,676.00 before the market close (at 2:30 PM GMT+1) on 30^th April 2020 and were up by 4.28% versus the previous day closing price. Stock 52 weeks High and Low are GBX 6,744.00 /GBX 5,130.00.

Growth Catalysts
The group has operations in multiple geographic locations, which help them to reduce the impact of risk related to regulations and political nature. The group’s balance sheet remained strong, with a decent level of cash conversion and strong growth in digital and eCommerce business.

Conclusion
Despite the COVID-19 outbreak, the company has an encouraging start to the new financial year. Presently, its supply chain is also flexible and resilient to meet the increasing demand. Considering the health emergency amid the of Coronavirus contagion, the company is likely to benefit since they cater to both hygiene and health market.

The company now expects the performance to be better than the original anticipations. Looking to the medium-term period, the outlook is sustained with mid-single-digit growth in organic revenue and mid 20’s margins by 2025.Coronavirus pandemic is set to drive the market for hand sanitizer, masks, and other hygiene and personal care products in FY20. At the same time, the group has seen demand surge for their Dettol and Lysol products.

Over the last 4 years (FY15 - FY19), the company’s revenue surged from GBP 8.8 billion in FY15 to GBP 12.8 billion in FY19. Compounded annual growth rate (CAGR) stood at 9.69 per cent.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 6,402.00 (as on 29^th April 2020).


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.

On 7^th May 2020, the company will hold its next annual general meeting.

Trading Update – Reflecting Decent Scenario

(Source: Trading Update, Company Website)

The company announced on 14^th April 2020, its trading update for the period 1 January 2020 to 31^st March 2020, with a surge in overall revenue of 8.9 per cent year-on-year in constant currency (9.4 per cent on a reported basis). In January 2020 and February 2020, the company delivered a substantial revenue increase of 17 per cent on a year-on-year basis. Before Coronavirus lockdowns were imposed, the rail division, includes German, North America, ALSA, and the UK, was trading strongly. The company continue to generate positive cashflow and EBITDA, despite this lockdown. The business has enhanced liquidity with more than GBP 200 million cash on deposit and over GBP 1 billion in undrawn committed facilities. The management of the group is withdrawing its recommendation for a final dividend, because of Coronavirus. The group offer crucial new services and is taking numerous steps that would help the workers and customers for the most vulnerable situation in an unprecedented crisis.

Share Price Performance
 
Daily Chart as at April-30-20, before the market closed (Source: Refinitiv, Thomson Reuters)

National Express Group PLC’s shares were trading at GBX 247.80 before the market close (at 2:38 PM GMT+1) on 30^th April 2020 and were down by 6.77% versus the previous day closing price. Stock 52 weeks High and Low are GBX 485.00 /GBX 66.30.

Valuation Metrics

(Source: LSE)

As on 31st March 2020, the Price/Earnings, EV/EBITDA and Price/Book multiples of the NEX Group were 7.5x, 4.6x and 1.0x, respectively and the same multiples were lower as compared with the Travel & Leisure industry. It is reflecting that the company is trading at a lower multiple as compared to its peers.

Growth Catalysts
In 2019, the group delivered strong growth and double-digit margin in each division. The group will continue to emphasize on continuing profit growth in the coming years and operational excellence to maximize shareholder returns.

Conclusion
During the impact of the pandemic across the businesses, the company continue to make significant progress in dealing. In the upcoming three months period, the company said that its cash flow projected to be positive. Despite this unprecedented crisis, NEX’s revenue was augmented in the current trading update, with growth in each division.

From the perspective of FY19, the company has delivered another strong performance.ALSA is on-track, and the UK coach business increased too. North America business had shown robust growth, boosted by consistent performance and the WeDriveU acquisition. 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. NEX stay confident that it will emerge out of this lockdown period with the portfolio of robust assets.

Based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 247.80 (as on 30^th April 2020, before the market close at 2:38 PM GMT+1).

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