Mediclinic International Plc

Mediclinic International Plc (MDC) is Stellenbosch, South Africa- headquartered, an international private healthcare services group. As on February 15, 2016, its shares got admitted to the main market of the London Bourse. Public Investment Corporation (SOC) Ltd., Genesis Investment Management LLP and Coronation Asset Management (Pty) Ltd. are the major institutional investors in the company (Source: Thomson Reuters).

Trading Update: H1 FY20
In the exchange filing made by the company with LSE, the healthcare equipment & services provider reported its trading update for the first half of the FY20 ended as on September 30, 2019. During the period under review, the group's revenue grew by 6.5% at a constant currency basis, and on a reported basis, the group's revenue grew by 9%, respectively. Pre-IFRS16 the group's EBITDA increased by 5% and the IFRS EBITDA Margin for the six-month under review was at 16.5%, respectively.

Also, the company holds a 29.9% interest in the LSE listed Spire Healthcare Group, which reported IFRS16 profit for the H1 FY20 at £7.1m. Mediclinic's H1 FY20 equity-accounted, the share of profit from Spire amounted to £2.1m.

Stock Performance
 
Daily Price Chart (as on October 17, 2019), before the market close. (Source: Thomson Reuters).

Shares of the MDC have delivered a negative price return of approximately 21.95% in a year-over period; however, recorded a price return of approximately 15% in the past five trading session. While writing (before the market close at 02:45 PM GMT), shares of the MDC were trading at GBX 384.8 and added around 4.5% against the previous traded level. In the year-ago period, its shares have registered a 52w high of GBX 451.0 and a 52w low of GBX 288.30, respectively.

Weak Fundamental, Negative Return on Equity and Higher Balance Sheet risk
Despite a moderate performance recorded by the group in the first half of the FY20, the group's performance is still quite below the average industry performance. With a lower gross margin of 37.7% against the industry average of 53.4%, negative operating margin whereas industry average operating margin stood at 7.9%, negative Return on Equity, whereas industry median stood at 4.7%, respectively. Also, the Long-term Debt/Equity ratio of the company at the end of FY19 stood at 36.1%, a 170bps higher against the industry median of 34.4%. This reflects a higher balance sheet risk for the company despite the fact that the group is not generating income at the bottom level.

Conclusion
However, post the company reported its first-half result, its shares are heading higher at the LSE, However, at the current trading level, on the daily price chart, price has stretched higher, as at the current trading level, its shares were trading significantly above the Upper Bollinger Band®, which is 2x deviation from the past 20-day average price of the stock, also it was quoting marginally above the 3x deviation from the past 20-day average trading price, which indicates a correction is due at the current trading level. Also, the 14-day and 9-day Relative Strength Index in the stock hovering in the overbought zone, which also indicates some correction could take place in near-term.

Therefore, based on the technical indicators and weak fundamentals coupled with higher balance sheet risk with the company, we have given an “Avoid” recommendation at the current price of GBX 384.8 (as on October 17, 2019, before the market close).

National Express Group Plc (NEX)

United Kingdom-headquartered, National Express Group Plc is a Travel and Leisure company, and its operating segments include UK Bus, UK Coach, German Rail, North America, Spain and Morocco. As on 26th April 1995, shares of the National Express Group Plc were got admitted to the main market of the LSE for trading. Newton Investment Management Ltd., M&G Investment Management Ltd. and Standard Life Investments Ltd are the main institutional investors. (Source: TR)

Recent Developments
The group announced as on Oct-16-19, that its Spanish and Moroccan division, ALSA, has been granted a major bus contract in Casablanca, for up to 15 years. It will help to secure more than €1 billion in revenue over its term.

Trading Update
The group reported its trading update (on Oct-17-19) for the period from July 01 to Sep 30, 2019. During the period, group's performance was decent with its revenue surged 14.5% in reported terms and by 11.8% on a constant currency basis, driven by the solid performance of the group's Spanish and Moroccan division, ALSA. Group's operating profit during the period under consideration surged by 14.3% in reported terms and 15.0% on a constant currency basis.

Group's segment-specific performance was also decent, with North America revenue recorded a growth of 20.6% at constant currency terms, with recently acquired WeDriveU performing broadly in line with the group's expectation. ALSA's revenue surged by 8.5% at constant currency basis, largely driven by organic growth and passenger numbers for the segment also surged by 9.5%, however the group's performance in the UK was mix with UK coach core revenue increased by 3.1%, whereas commercial bus revenue grew just 0.7%, driven by weak passenger growth.

Stock Performance
 
Daily Price Chart (as on October 17, 2019), before the market close. (Source: Thomson Reuters).

Share of the NEX in the year-over period has delivered a price return of approximately 15%, up by around 21% on a YTD basis and surged approximately 12% in the past five trading sessions. At the time of writing (before the market close, at 03:20 PM GMT), shares of the NEX were quoting at GBX 455.6 and added 4.20 points or 0.95% against the previous traded level.

Conclusion
In the latest trading update reported by the company for the July 01 to September 30, the group’s performed well, with decent revenue growth, operating profit growth and margins. Also, the recent major bus contract which the group secured in Casablanca, for up to 15 years, will boost the group's top line in the coming months. Also, despite a decent surge in the stock price over the year-ago period, the dividend yield of the company stood at 3.39%, which is a crucial measure for an income investor as well.

From the technical standpoint, its shares were trading well above its short-term as well as long-term support level of 50-day and 200-day simple moving average prices, which reflects an uptrend in the stock and carrying potential to move up further as 14-Relative Strength Index of the stock also hovering in the neutral zone, which is strengthening the upside move.

Therefore, based on group's decent performance recorded during 01 July to September 20, 2019 period and supported with favourable technical indicators, we have given a “Hold” recommendation at the closing price of GBX 451.8 (as on October 16, 2019).

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