Royal Dutch Shell Plc

Royal Dutch Shell Plc (LON: RDSA) is a petrochemical and energy company which is involved in the exploring, producing, refining and marketing of oil and natural gas.

Financial Highlights – Q4 and Financial Year 2019 (31^st December 2019, USD, million)

(Source: Quarterly Report, Company Website)
 
For the financial year ending 31^st December 2019, due to a decline in revenue from integrated gas and downstream segments, the revenue declined to USD 344,877 million from USD 388,379 million in FY2018. In Q4 FY2019, the revenue stood at USD 84,006 million versus USD 102,228 million in Q4 FY2018. In FY2019, the PBT (Profit before tax) stood at USD 25,486 million versus USD 35,621 million in FY2018. The PBT in Q4 FY2019 declined to USD 2,791 million versus USD 7,907 million in Q4 FY2018. The net income (attributable to shareholders) stood at USD 15,843 million in FY2019 versus USD 23,352 million in FY2018. The basic earnings per share declined to 1.97 cents in FY2019 from 2.82 cents in FY2018. The basic earnings per share declined to 0.12 cents in Q4 FY2019 from 0.68 cents in Q4 FY2018.

Share Price Performance

Daily Chart as of  January 31^st, 2020, before the market close (Source: Thomson Reuters)

Royal Dutch Shell Plc shares were trading at GBX 2,033.50 at the time of writing before the market close (at 8:45 AM GMT) on 31^st January 2020 and were down by 0.22% versus the previous day closing price. Stock's 52 weeks High is GBX 2,811.38 and Low is GBX 2,014.50.

Valuation Methodology

*Peers: TechnipFMC Plc, Cairn Energy Plc, BP Plc, and Tullow Oil Plc.

Conclusion
The company has shown a decline in financial performance in the Q4 and Financial year 2019. Both the top-line and the Bottom-line performance have declined, while the operating expenses declined for the period. New contracts, increasing demand for oil and petroleum products and upstream investment forecast for 2019 could provide new growth opportunities to the company. The company looks attractive and has the capability to sustain for the long term. Over the course of 4 years (FY14 - FY18), the company’s net income surged from USD14,874 million in FY14 to USD23,352 million in FY2018. Compounded annual growth rate (CAGR) stood at 11.94 per cent.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “BUY” recommendation at the current price of GBX 2,015.50 (as on 31^st January 2020, before the market close at 10:24 AM GMT), with high single-digit upside potential based on 11.90x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).

BT Group Plc

BT Group Plc (LON: BT.A) is a fixed-line telecommunication company, based out of London. The group’s business is built around the clients, delivering value and serving their needs persistently. 

Trading Update
On 30th January 2020, BT Group released an update for 9 months trading ending 31st December 2019. Driven by challenges face from the competition, a decline in legacy product and regulation, the company’s reported revenue declined by 2 per cent to GBP 17,246 million for the period. The adjusted revenue declined by 2 per cent to GBP 17,192 million. Due to lower revenue, higher Openreach’s operating costs, investment in customer experience and high spectrum fees, the company’s adjusted EBITDA declined by 3 per cent to GBP 5,900 million. The reported PBT (Profit before tax) stood at GBP 1,911 million for the period.

Share Price Performance

Daily Chart as of  January 31^st, 2020, before the market close (Source: Thomson Reuters)

BT Group Plc shares were trading at GBX 161.90 at the time of writing before the market close (at 9:58 AM GMT) on 31^st January 2020 and were down by 0.31% versus the previous day closing price. Stock's 52 weeks High is GBX 238.00 and Low is GBX 157.67.

Valuation Methodology
 
*Peers: Altice Europe NV, Renault SA, Liberty Global Plc, Vodafone Group Plc and Telenet Group Holding NV.

Conclusion
In the nine months period ending 31^st December 2019, the company’s financial performance has declined moderately, though it was in line with the expectations. However, the company is in a strong position. It has launched new products for consumer and business segments.  In Openreach segment, the company is the largest FTTP (Fibre to the Premises) network in the United Kingdom, including more than 2 million premises passed, 4 million by March 2021; ambition to pass 15 million by mid-2020s, subject to the right conditions; and ultimately wants to cover most of the UK. For the financial year 2021, the company’s transformational plans drive long-term growth, due to the cost transformation programme on track. Over the course of 3 years (FY16 - FY19), the company’s revenue surged from GBP 18,879 million in FY16 to GBP 23,459 million in FY2019. Compounded annual growth rate (CAGR) stood at 7.5 per cent.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “BUY” recommendation at the current price of GBX 160.40 (as on 31^st January 2020, before the market close at 10:24 AM GMT), with single-digit upside potential, based on 3.02x NTM Price/Cash Flow (approx.) on FY20E cash flow per share (approx.).

Johnson Matthey Plc

Johnson Matthey PLC (LON: JMAT) is a British multinational speciality chemicals company. The group’s operations have been organised into four segments: Clean Air, Efficient Natural Resources, Health and New Markets.

Financial Highlights – H1 Financial Year 2020 (30th September 2019, GBP, million)
In the first half of the financial year 2020, due to higher prices of the precious metal for the period, the company’s revenue increased by 37 per cent to GBP 6,818 million as against GBP 4,967 million in H1 FY2019. The company’s underlying operating profit declined by 5 per cent on CER basis from GBP 271 million in H1 FY2019 to GBP 265 million in H1 FY2020, due to GBP 15 million of one-off costs in Clean Air. The company’s reported PBT (Profit before tax) declined by 8 per cent to GBP 225 million in H1 FY2020 from GBP 244 million in H1 FY2019. The PAT (Profit after tax) in H1 FY2020 stood at GBP 176 million versus GBP 204 million in H1 FY2019. In H1 FY2020, the company’s basic earnings per share stood at 91.8 pence versus 106.1 pence in the H1 FY2019. The company’s interim dividend went up by 5 per cent from 23.25 pence in H1 FY2019 to 24.50 pence in the H1 FY2020. 

Share Price Performance

Daily Chart as of  January 31^st, 2020, before the market close (Source: Thomson Reuters)

Johnson Matthey Plc shares were trading at GBX 2,611.00 at the time of writing before the market close (at 11:00 AM GMT) on 31^st January 2020 and were down by 1.32% versus the previous day closing price. Stock's 52 weeks High is GBX 3,475.00 and Low is GBX 2,605.00.

Valuation Methodology

*Peers: Croda International Plc, Victrex Plc, Elementis Plc, Carclo Plc and Synthomer Plc.

Conclusion
The company has a strong portfolio of products and technologies. In the environmental industry, the group's products and technologies are used to control emissions from vehicles and factories, remove unwanted impurities in oil refining processes and produce chemicals from sustainable feedstocks. Such contracts will increase the reach and expertise of the company, thus helping it to increase its revenue in the future. The company’s growth is expected to be driven by continued strong growth in Clean Air, followed by the company’s diesel share gains and growth in heavy-duty. Over the course of 5 years (FY14 - FY19), the company’s net income surged from GBP 340 million in FY14 to GBP 413 million in FY19. Compounded annual growth rate (CAGR) stood at 3.97 per cent.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “BUY” recommendation at the current price of GBX 2,606.00 (as on 31^st January 2020, before the market close at 10:45 AM GMT) with single-digit upside potential based on 12.75x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).

888 Holdings Plc

888 Holdings Plc (LON: 888) is an online gaming operator. The company provides virtual online gaming and entertainment solutions over the internet.

Recent News
On 23rd January 2020, 888 Holdings announced that it would release full-year results for the period ending 31st December 2019 on 24th March 2020, Tuesday.

Trading Update
On 7th January 2020, 888 Holdings announced a post-closing trading update for the full year ending 31st December 2019. In the second half of the financial year, the company stated all-time monthly record in revenue in December and is confident to reach the set targets for its adjusted EBITDA. The growth in revenue was driven by a solid performance from Orbit casino in multiple markets in which the company operates and also supported by growth in Sport. The company faced many challenges in Poker, though were satisfied with the rollout of the first phase of Poker 8, new poker platform and made decent progress in the second half of the financial year. The company is looking forward to adding multiple new features before it rolls out the final phase in the year 2020.

Share Price Performance

Daily Chart as of  January 31^st, 2020, before the market close (Source: Thomson Reuters)

888 Holdings Plc shares were trading at GBX 135.00 at the time of writing before the market close (at 11:52 AM GMT) on 31^st January 2020 and were up by 0.52% versus the previous day closing price. Stock's 52 weeks High is GBX 183.30 and Low is GBX 126.70.

Valuation Methodology

*Peers: Flutter Entertainment Plc, Kambi Group Plc, Best Of The Best Plc and Raketech Group Holdings Plc.

Conclusion
In the second half of the financial year 2019,the company had shown improvement in the revenue and adjusted EBITDA. The group madeseveral strategic signs of progress, like the acquisition of sports betting platform BetBright, Costa Bingo a portfolio of Bingo brands, and successful launch in two European regulated markets like Sweden and Portugal. Over the course of 5 years (FY13 - FY18), the company’s net income surged from USD 400.5 million in FY13 to USD 540.6 million in FY18. Compounded annual growth rate (CAGR) stood at 6.18 per cent.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “BUY” recommendation at the current price of GBX 133.50 (as on 31^st January 2020, before the market close at 10:45 AM GMT) with single-digit upside potential based on 14.65x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).

City Pub Group Plc

City Pub Group Plc (LON: CPC) is a London, the United Kingdom-based company which owns and manage an estate of first-rate pubs throughout the southern half of England and Wales. 

Trading Update
On 13th January 2020, City Pub Group released an update for 52-weeks period trading ending 29th December 2019. The company’s total turnover surged by around 31 per cent to GBP 59.8 million, with sales on a like-for-like basis surged by 1.7 per cent for the period. The company’s performance remained decent for a year but due to challenges faced in the trading, the latter part of the fourth quarter declined. Driven by appealing offers, the sales on a like-for-like basis for the 6-week period ending 5^th January 2020 were ahead of the last year data for the same period. The company’s adjusted EBITDA was expected to be in between GBP 9.1 million to GBP 9.2 million, below market expectations and 15 per cent more than last year data.

Share Price Performance

Daily Chart as of  January 31^st, 2020, before the market close (Source: Thomson Reuters)

City Pub Group Plc shares were trading at GBX 184.10 at the time of writing before the market close (at 12:26 PM GMT) on 31^st January 2020 and were down by 2.33% versus the previous day closing price. Stock's 52 weeks High is GBX 240.00 and Low is GBX 166.50.

Valuation Methodology

*Peers: EI Group Plc, Fuller Smith & Turner Plc, On The Beach Group Plc and GYM Group Plc.

Conclusion
The group is exposed to several political, micro and macro-economic headwinds like the slowdown in shoppers spending and inflationary pressures. The company cannot ignore the uncertainty in the market as created due to Brexit. The targeted expansion of high-quality larger pubs with letting rooms has provided robust progress for the company. In the face of strong comparatives, the company has delivered excellent like for like growth too. As the development sites begin trading during 2020, the company will drive the performance going forward. Over the course of 4 years (FY14 - FY18), the company’s revenue surged from £15.26 million in FY14 to £45.67 million in FY18. Compounded annual growth rate (CAGR) stood at 31.53 per cent.

Based on the above rationale and the valuation done using the above methodology, we have given a “Speculative Buy” recommendation at the current price of GBX 184.10 (as on 31^st January 2020, before the market close at 11:23 AM GMT) with single-digit upside potential, based on the 27.05x NTM Price/Earnings (approx.) on the FY19E earnings per share (approx.).

Xaar Plc

Xaar PLC (LON: XAR) is the world’s prominent independent manufacturer of piezoelectric drop-on-demand industrial inkjet printheads. 

Trading Update
On 16^th January 2020, Xaar released an update for trading for the second half ending 31^st December 2019. The company’s trading for H2 FY2019 was in line with H1, with the expected revenue to be around GBP 46 million for the period. The company had made a further investment in the development of Thin Film platform and successfully completed the restructuring of its Printhead Business. The company had reduced the Thin Film’s costs to a minimum level which resulted in higher satisfaction level. The company received net cash of GBP 12 million for the period. The cash balances stood at GBP 25.4 million ( including Xaar 3D’s investment) as on 31^st December 2019. The group will release its preliminary results on 24^th March 2019.

Share Price Performance

Daily Chart as of  January 31^st, 2020, before the market close (Source: Thomson Reuters)

Xaar Plc shares were trading at GBX 38.44 at the time of writing before the market close (at 1:58 PM GMT) on 31^st January 2020 and were down by 4.38% versus the previous day closing price. Stock's 52 weeks High is GBX 160.00 and Low is GBX 38.00.

Conclusion
The company’s operations are impacted by several risks such ascompetition, Brexit, inventory obsolescence, loss of manufacturing facility and volatility in exchange rates. The company had increased investment in Thin Film, which has helped the company to lower down the costs to the minimum level and resulted in increased satisfaction levels among customers. The company, after a successful restructuring of its Printhead Business, looks fordecent progress and robust sales pipeline. The company also believe that the next stage of the partnership with Stratasys provides substantial value for the investors. Also, the 3D investment will also improve the cash position of the group. 

Based on the healthy prospects, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 38.05 (as on 31^st January 2020, before the market close at 12:20 PM GMT).

*All forecasted figures and Peer information have been taken from Thomson Reuters.Currency exchange rate taken for 1 USD = 0.76119 GBP.

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