Auto Trader Group PLC
 

Auto Trader Group Plc (AUTO) is engaged in the digital automotive marketplace. The company provides products and services to retailers and home traders to support their online activities. It offers vehicle advertisement on its Websites for individuals; and display advertising on its Websites for advertising agencies and retailers, as well as insurance and loan financing products to consumers.

Financial Highlights (H1 FY2019, £million)

(Source: Half-Yearly Reports, Company Website)

The group’s total reported revenue surged by 7 per cent to £176.8 millionas compared to £165 million in H1 2018, due to an increase in trade and manufacturer & agency business. Operating profit climbed by 10 per cent to £120.6 millionagainst £109.9 million in H1 FY18. The operating profit margin was up to 68 per cent. Profit before taxation increased by 9 per cent to £114.5 million as compared with the H1 2018 of £105.3m. The Group’s tax charge was £21.9 million (H1 FY18 (restated): £20.7 million) which signifies an effective tax rate of 19.1 per cent in line with the average standard United Kingdom rate. The basic earnings per share rose by 12 per cent to 9.78 pence as compared to 8.71 pence in H1 2018. For H1 2019, the management board declared an interim dividend per share of 2.1 pence.

Share Price Performance

Daily Chart as at April-25-19, before the market closed (Source: Thomson Reuters) 

On 25^th April 2019, at the time of writing (before the market close, GMT 8:22 AM), AUTO shares were trading at GBX 569.40, down by 0.07 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 570.80/GBX 339.80. The company’s stock beta was 0.40, reflecting the lower volatility of the stock as compared to the benchmark index.

Key Risks
The group will be facing macro headwinds due to Brexit uncertainties in the near term. Other risks elements include higher IT sector valuation and competition from other online vertical/horizontal players.

Valuation Methodology


Conclusion
The company had shown good financial performance in the current half-yearly result and most of the revenue was generated from its trade business.The company is facing fierce competition from its competitors and is impacted by economic and political instability. Any macroeconomic changes in the UK automotive market will impact the company’s performance. However, the final deal of Brexit has still not been given any shape yet and the company faces substantial uncertainty about the future impacts of it on the economies of Europe and the United Kingdom. The effect of weak investment markets is a potential headwind for the company in 2019. Based on the risks linked with the company’s operations, we recommend investors to keep a cautious “Watch” on the stock at the closing price of GBX 569.80 (as on 24^th April 2019).

EasyJet plc

EasyJet PLC (EZJ) is a British-based low-cost European point-to-point airline company. The company is known for delivering low fares, which is achieved through operational efficiency on point-to-point routes. The company has four geographic segments which are differentiated according to the origin country. The segments include the United Kingdom, Southern Europe, Northern Europe and Other.

Financial Highlights (Q1 FY2019, £million)

(Source: Q1 trading Update, Company Website)

The company’s reported revenue in the first quarter to December 31, 2018, surged by 13.7 per cent to £1,296 million.The passenger reported revenue climbed by 12.2 per cent to £1,025 million and ancillary reported revenue was up by 19.9 per cent to £271 million. In Q1 FY19, Passengers number increased by 15.1 per cent to 21.6 million, due to an increase in the capacity of 18.2 per cent to 24.1 million seats which were slightly lower than originally planned. The company’s Load factor was down to 89.7 per cent, driven by an increase in the late demand and the impact of Tegel flying. In Q1 FY19, the headline cost per seat excluding fuel at constant currency was up by 1.0 per cent.

The company's profitability margins increased in the year 2018 as compared to the last year and were inching towards the industry median. The company’s debt-equity ratio was lower against the industry median, reflecting company was low leveraged against its peers.

Share Price Performance

Daily Chart as at April-25-19, before the market closed (Source: Thomson Reuters) 

On 25^th April 2019, at the time of writing (before the market close, GMT 8:27 AM), EZJ shares were trading at GBX 1,171.50, down by 0.21 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 1,808.50/GBX 997.30. The company’s stock beta was 0.29, reflecting the lower volatility of the stock against the benchmark index.

Recent News
On 23^rd April 2019, the US President announced the end of waivers from US sanctions granted to India, China, Japan, South Korea and Turkey, and some of Iran’s largest customers. This will impact EZJ’s revenue and profit. One-way airlines are tackling the challenge is with more fuel-efficient planes. EasyJet, for example, has ordered 100 Airbus, which are 13-15 per cent more fuel efficient than existing models.  

Key Risks
A decline in demand for air travel may lead to excess capacity which will adversely impact the financials. Climate change is leading to unstable weather, including a higher number of storms.This can impact the company’s operations, including a rise in cancelled or delayed flights which can increase disruption costs. Uncertainty around Brexit and the wider macro-economic environment has put pressure on the stock lately.

Conclusion
Although industry-wide disruption provided a tough working environment for the industry, the company was still able to post strong financials. However, a sudden increase in jet fuel prices or fluctuations in the interest rate can impact the financials. Based on the decent financial performance, we have given a “Hold” recommendation at the closing price of GBX 1,174 (as on 24^th April 2019).
 
*All forecasted figures and peers have been taken from Thomson Reuters.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser. Our publications are NOT a solicitation or recommendation to buy, sell or hold.