WH Smith PLC

The United Kingdom-headquartered WH Smith is engaged in high street retail and travel businesses. The high Street business sells a variety of products which are divided into categories: Stationery, Books, and News and Impulse and few entertainment products in some stores.

Recent News
On 17^th October 2019, the company announced the signing of an agreement to acquire MRG (Marshall Retail Group) for a total consideration of approximately £312 million ($400 million) on a cash and debt-free basis.

On 17^th October 2019, the company released a proposed placing of new ordinary shares in the company to institutional investors to raise gross proceeds of around £155 million.

Financial Highlights (for the year ended 31^st August 2019, £million)

(Source: Preliminary Results, Company Fillings, LSE)

On 17th October 2019, the company announced its preliminary results for the year ended 31st August 2019. The group revenue rose by 11 per cent year on year to £1.397 billion in 2019, due to an increase in the travel segment. The company also highlighted that the group’s profit from trading operations was up 9 per cent year on year from £163 million to £177 million in 2019. The company also reported an increase of 6 per cent year on year in headline earnings per share to GBX 114.7 per share. In lieu of this performance, the company proposed a dividend of GBX 58.2 per share, an increase of 8 per cent as compared to the dividend proposed in the previous year at GBX 54.1.

Share Price Performance

Daily Chart as at October-18-19, before the market closed (Source: Thomson Reuters)

On 18th October 2019, WH Smith PLC shares were trading at GBX 2,236 at the time of writing before the market close (at 9:13 AM GMT), up by 1.176% against the previous day closing price. Stock's 52 weeks High and Low are GBX 2,308/GBX 1,678. The company’s stock beta stood at 0.71, reflecting the lower movement of the stock as compared to the benchmark index.

Conclusion
The company has recorded another robust performance in the current period. Robust sales growth of 22 per cent in the travel business due to the United Kingdom store investment programme and increasing global business. Globally, the company has achieved several units in the current year, with substantial wins in Australia, Europe, and the Middle East and recently, the first company win in a key US airport. 

The company now have 433 units open globally, over 30 countries and more than 100 airports. The company has provided decent performance in the High Street division. The company continue to emphasis on increasing the Stationery offer, and this stays the main zone of investment. The company declared that they have entered into an agreement to acquire Marshall Retail Group. 

The group’s board has proposed an increase of 8 per cent in dividend,reflecting the company's cash generation and the belief in the upcoming prospects. Whilst there is uncertainty in the wider political and economic environment. The company will continue to focus on cash generation, profitable progress, and providing value for shareholders.

Therefore, based on the above rationale, we have given a "Hold" recommendation on the stock, at the closing price of GBX 2,210 (as on October 17, 2019).
 

Domino's Pizza Group PLC

United Kingdom-based Domino’s Pizza Group Plc (DOM) operates as a part of the Domino’s worldwide Pizza brand.  The company is a leader in the United Kingdom in terms of Pizza brands and is also one of the most significant entities in the Ireland Pizza space.

Q3 FY2019 Trading Statement (as on 17^th October 2019)

(Source: Trading Statement, Company Fillings, LSE)

The company announced a trading statement for the 13 weeks ended 29th September 2019. The company reported a surge of 3.4 per cent year on year in group system sales at £313.5 million in Q3 2019 as compared to £303.3 million in 13 weeks ended 30 September 2018 (Q3 2018). A significant portion of this came from UK and Republic of Ireland segment, where the sales reportedly surged by 3.9 per cent year on year to £288.2 million in Q3 2019 as compared to £277.3 million in Q3 2018. The company reported that 9 new stores were opened in the United Kingdom and 3 in Northern Ireland. The company also reported that they would manage an exit from other locations in the international market in an orderly way following, an International Markets review conducted by the company.

Share Price Performance

Daily Chart as at October-18-19, before the market closed (Source: Thomson Reuters)

On 18th October 2019, Domino's Pizza Group PLC shares were trading at GBX 269.50 at the time of writing before the market close (at 10:19 AM GMT), down by 2.71% against the previous day closing price. Stock's 52 weeks High and Low are GBX 301.05/GBX 218.90. The company’s stock beta stood at 1.23, reflecting the higher movement of the stock as compared to the benchmark index.

Valuation Methodology 


Conclusion
The company provided a decent performance in Ireland and the core UK markets, with system sales increased by 3.9 per cent, against a market backdrop that stays challenging. Normal working practices persist in being affected by the franchisee dispute. As the company said in the first half of 2019, the situation is complex and anticipate a resolution to take time, certainly into the year 2020.

Although the financial results had become stable, the performance of the global business stays disappointing. Over the past six weeks, the company had finished a review with external consultants, the upcoming prospects for the businesses, and assessing each of the four global markets. The group’s board has, therefore agreed to exit the markets in a systematic manner.

The company is facing emerging headwinds and cost pressures. Currently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level.
Therefore, based on the above rationale, we have given a “Watch” recommendation at the closing price of GBX 277 (as on October 17, 2019), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures and peers have been taken from Thomson Reuters.

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