Cello Health Plc

Cello Health Plc (LON: CLL) is a healthcare-focused marketing advisory company.  The group provides market research, consulting and direct marketing services to the global pharmaceuticals, biotechnology, diagnostics, healthcare equipment and consumer health companies.

On 17^th September 2020, the group will announce the next interim update. 

Financial Highlights – Financial Year 2019 (31^st December 2019, GBP, thousand)

(Source: Annual Report, Company Website)
 
For the financial year ending 31st December 2019, the company reported revenue of £166,770 thousand against £158,947 thousand for the previous year of the same period. The net revenue for FY2019 stood at £107,563 thousand as against £100,790 thousand in FY2018. There was an increase in net revenue due to a decrease in the Third-party project costs in the current financial year. The operating profit for FY2019 stood at £7,597 thousand versus the operating profit of £9,717 thousand in FY2018. The profit before tax for FY2019 stood at £7,112 thousand as against £9,378 thousand in FY2018. The profit for the year (continuing operations) stood at £4,825 thousand in FY2019 against £7,345 thousand in FY2018. The loss for the year (continuing and discontinued operations) stood at £943 thousand in FY2019 against a profit for the year (continuing and discontinued operations) £6,618 thousand in FY2018. The basis earning per share (continuing operations) stood at 4.51 pence in FY2019 as against 6.96 pence in FY2018. The diluted earnings per share (continuing operations) stood at 4.46 pence in FY2019 as against 6.82 pence in FY2018.

Share Price Performance
 
Daily Chart as of March 25^th, 2020, before the market close (Source: Thomson Reuters)

Cello Health Plc shares were trading at GBX 104.00 at the time of writing before the market close (at 12.10 PM GMT) on 25^th March 2020 and down by 4.15% versus the previous day closing price. Stock's 52 weeks High is GBX 150.00 and Low is GBX 100.00.

Valuation Methodology

*Peers: Mission Group Plc, YouGov Plc, Kin and Carta Plc and Reworld Media SA.

Conclusion
The company has shown a decline in financial performance in the financial year 2019.Althoughthe revenue has improved, while the profitability has declined for the period. The company entered the year 2020 with a decent order book and performance remained good for few months trading in FY2020. The world economy is going through a challenging period due to outbreak of COVID-19 and results in a disruption in client spending. The group’s client base is less sensitive against south term consumer behaviour changes, and its operations are not materially impacted by these changes. The company’s core pharmaceutical and biotechnology business remained positive, with strong R&D pipelines. In the US market, the group’s technologies and therapies are getting rapid approvals from the FDA, which will help then to establish a strong market position.

Based on the above rationale and supported by valuation done using the above method, we have given a "Speculative Buy" recommendation at the current price of GBX 104.00 (as on 25^th March 2020, before the market close at 12.10 PM GMT) with lower double-digit upside potential based on 12.40x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.)

Gfinity Plc

Gfinity Plc (LON: GFIN) is an AIM-listed global esports business group. The group utilizes its expertise to outline, create and deliver exceptional experiences and to offer consultancy services and winning approach for sports right holders, media companies, game publishers, and commercial partners.

Recent News
On 25^th March 2020,Gfinity announced the signing of programmatic media buying agreementwith Bidstack. The partnership will generate additional revenuefrom Gfinityesports web platformsand RealSport101effective from 1st April 2020.

Trading Update (as on 16^th March 2020)
On 16^th March 2020, Gfinity released an update for the trading performance and full-year outlook. The group’s revenue for the six months period ending 31^st December 2019 remained the same. The revenue for the first half is expected to be GBP 3.5 million with a gross profit and adjusted operating loss of GBP 2.1 million and GBP 2.4 million, respectively. In the second half of the financial year 2020, the group doesn’t see commercial opportunitiesand strategic partnershipsdiscussionsas expected by the management.With the outbreak of COVID-19, the market conditionsbecame challenging as all esports, and live sporting eventshave been postponed. The board expects its revenue for full year ending 30^th June 2020 to be on the lower side with adjusted loss before tax to increase against market expectations. The group islooking forward to discussions with potential strategic investors for short term financing.

Share Price Performance
 
Daily Chart as of March 25^th, 2020, before the market close (Source: Thomson Reuters)

Gfinity Plc shares were trading at GBX 1.7199 at the time of writing before the market close (at 12.16 PM GMT) on 25^th March 2020 and up by 81.04% versus the previous day closing price. Stock's 52 weeks High is GBX 7.00 and Low is GBX 0.3025.

Conclusion
With the outbreak of COVID-19, various esports and live sporting eventshave been postponed, which impacted the company’s operations. The company has refocused the business on a "Strategic Client Management model" that has enabled them to build a robust pipeline of new commercial prospects and bolster the current strategic partnerships. The company isfocussed on working closely with the partners to deliver distinctive esports solutions and to assist them in connecting with young gamers around the globe. The three-year strategic plan is set, and the company has a robust financial position. The group’s partnership with Bidstack will help them to generate additional revenuefrom Gfinityesports web platformsand RealSport101.

Based on the above rationale, we have given a "Speculative Buy" recommendation at the closing price of GBX 0.95 (as on 24^th March 2020).
 
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.
 *The Speculative buy recommendation is valid for the current price as covered in the report (as on 25^th March 2020).

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