Plus500 Limited

Plus500 Limited is an FTSE 250 listed company. It is a leading provider of Contracts for Difference (CFDs), delivering trading facilities on shares, forex, commodities, cryptocurrencies, ETFs, options and indices, alongside innovative trading technology.

On 15 February 2022, the Company will release full-year FY21 results

Rationale for Valuation – SELL at GBX 1,481.50

• Slow Operational Progress: On a YTD basis, PLUS had shown a declining trend in New Customers and ARPU (“Average Revenue per User”) during 9M FY21, as it dropped year-on-year by around 33% and approximately 26%, respectively.
• Weak Financial Performance: The Company’s top-line revenue witnessed a substantial drop of around 29% during 9M FY21. Moreover, EBITDA had shown a noticeable decline of around 36% during 9M FY21
• Profit Booking Opportunity: PLUS came very close to the target levels mentioned in the last coverage and 52 weeks high. Thus, it is a decent opportunity for the investors to book profit at current levels.
• Unfavourable Technical Indicators: From a technical standpoint, PLUS is hovering around the upper Bollinger band, indicating a bearish price pattern. Furthermore, the 14-days RSI of ~85.09 approaches overbought territory and indicates a correction in the stock price.

Key Risks

• Federal Reserve Meeting Minutes: The recent Federal Reserve meeting minutes indicated an earlier and faster rate hike. Thus, it could adversely impact the global Equities.
• Market Risk: Any volatile movement in the market or forex could have a material impact on the operations of the Company.

FY21 Trading Update (as of 10 January 2022)

• Top-Line Business: PLUS had reported a total revenue of USD 718 million during FY21.
• Decent Cash Balance: Cash balances as of 30 September 2021 stood at USD 766.9 million.
• New Customers: PLUS had added 196,150 New Customers during FY21.          

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: Price/Book Approach (FY21) (Illustrative) 

Conclusion 

The Company is having lower dividend payout when compared with the Investment Banking & Brokerage Services industry. Moreover, the Company had witnessed a substantial reduction in revenue and profitability for the first nine months of 2021. On the operational front, the number of active customers and ARPU also demonstrated a declining trend for 9M FY21. Thus, it would be prudent for the clients to book profit at the current levels amid sluggish UK macroeconomic outlook. The stock made a 52-week High and Low of GBX 1,586.98 and GBX 1,234.00, respectively.

Based on the weak operational performance, reduction in top-line business, and unfavourable valuation conducted above, we have given a “SELL” stance on Plus500 Limited at the current market price of GBX 1,481.50 (as on 10 January 2022 at 08:21 AM GMT).  

Morgan Sindall Group PLC

Morgan Sindall Group PLC is an FTSE 250 index listed leading UK Construction & Regeneration group. Moreover, MGNS employs around 6,600 employees and operates in public, regulated and private sectors.

MGNS had paid an interim dividend of 30 pence per share on 26 October 2021, while the ex-dividend date was 07 October 2021.

Investment Rationale for Valuation – Sell at GBX 2,445.00

• UK Construction PMI: According to the IHS Markit/CIPS, the UK construction PMI had dropped to three-months low of ~54.3 in December 2021.
• Weak Profitability: The Company’s profitability margins like operating margin and the net margin remained lower than the respective industry median during H1 FY21.
• Decent Gains: The Company’s stock price witnessed decent gains since the last coverage and approached the target levels. Thus, it is a decent opportunity for the investors to book profit at current levels.
• Technical Indicators: From a technical standpoint, MGNS is hovering lower than the 20-days exponential moving average of GBX 2,461.00, indicating a bearish price pattern. Furthermore, the MACD line remained lower than the signal line, and indicates a correction in the stock price.

Key Risks

• Interest Rate Hike: The recent interest rate hike of 0.15% to curb inflation may keep investors’ away from UK Equities.
• Disruption in the Supply Chain: The failure of a key supplier to meet its contractual obligations could potentially result in some short to medium-term price increases and other short-term delays & disruptions to the Group’s projects and operations.

Trading Update (as of 03 November 2021)

• Order Book: The Company’s construction secured order book stood at £4.7 billion as of 30 September 2021.
• Net Cash: The average daily net cash from 1 July to 29 October 2021 remained £294 million.
• Operational Headwinds: The supply-chain disruptions and raw materials inflation had caused significant operational headwinds during the first nine months of 2021.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company stated in a recently released trading update that Property Services division had seen slightly lower-than-expected planned maintenance activity. Furthermore, the surprise rise in interest rates by the Bank of England and record Covid-19 cases in the UK may dent the growth prospects. Meanwhile, the stock price came close to the target levels provided in the last coverage. Thus, it would be prudent for the clients to book profit at the current levels on this Company. The stock made a 52-week low and high of GBX 1,388.00 and GBX 2,730.00, respectively.

Based on the low construction PMI, increase in interest rates, and unfavourable valuation as done using the above method, we have given a “SELL” recommendation on Morgan Sindall Group PLC at the current market price of GBX 2,445.00 (as on 10 January 2022 at 08:15 AM GMT).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

Disclaimer

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