Associated British Foods Plc

Associated British Foods Plc (LON: ABF) is a London-based diversified group, offering a wide range of products and services which are marketed through many widely known brands and enjoy a high degree of autonomy, with operations in 52 countries across Europe, Southern Africa, the Americas, Asia and Australia. The group has five reporting segments being Agriculture, Sugar, Ingredients, Retail and Grocery.

Trading Update
On 16th January 2020, Associated British Foods released a trading update for 16-weeks period till 4th January 2020. The company expects to make progress with an unchanged outlook. The company expects its revenue to be ahead by 4 per cent on constant exchange rates versus the last year data of the same period. Driven by a stronger average exchange rate of sterling versus the euro for the period, the company’s sales (continuing operations) are expected to be 3 per cent above the last year data for the same period on actual exchange rates.

In the retail business, the company’s Primark had been performing well. Driven by an increase in selling space for the period, the company’s sales were above by 4.5 per cent on CER (constant exchange rate) basis and by 3 per cent on AER (actual exchange rate) basis. In the UK, driven by contribution from new selling space, the company’s sales surged by 4 per cent versus the last year data for the same period. In the Eurozone, driven by strong progress in Italy and France, the sales increased by 5.1 per cent on a CER basis versus last year data for the same period. German business also showed some improvements in the initial stage. The company’s US business delivered sales growth on a like-for-like basis. The company’s operating profit margin for the period declined as expected by the board.  

In the sugar business, the company’s revenue surged by 7 per cent on a CER basis and 5 per cent on AER basis.The sugar prices in the EU remained at higher levels than last year. The sugar production in the UK is expected to be around 1.18 million tonnes which are more than last year’s production data. In Spain, the company delivered increased operating performance driven by higher sugar prices and lower beet prices.

In the grocery business, the company’s sales improved on CER and AER versus the last year data of the same period. In the agriculture business, the revenue increased by 10 per cent on CER and AER basis, the margins for the period declined. In the ingredients business, the sales went up by 3 per cent on a CER basis and 1 per cent on AER basis.

Share Price Performance

Daily Chart as of  January 17^th, 2020, before the market close (Source: Thomson Reuters)

Associated British Foods Plc shares were trading at GBX 2,612.25 at the time of writing before the market close (at 11:32 AM GMT) on 17^th January 2020 and were down by 1.83% versus the previous day closing price. Stock's 52 weeks High is GBX 2,704.27 and Low is GBX 2,078.81.The shares of the company have delivered a positive return of 17.12 per cent in the last quarter. The company’s stock has given investors 0.40 per cent of a negative return in the last week.

Conclusion
Driven by strong performances from Grocery and Primark, the company reported an increase in the profits from non-sugar activities, which showed the resilience of the group in a year when its ongoing sugar businesses experienced a significant drop in profits. Investments in the food businesses focused on capacity expansion and projects are expected to drive further operational efficiencies, along with strong profit growth in Grocery and the continued expansion of Primark. Its leading brand Primark function through the discrete supply chain for its store in each of the UK, US and EU27, which will prevent the group’s supply chain disruption against the Brexit. Also, the group’s business model is not very sensitive to the Brexit related issues as wherever possible, its food production aligns with the end market for the product.

Based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 2,602.00 (as on 17^th January 2020, before the market close at 10:35 AM GMT).

NMC Health Plc

NMC Health Plc (LON: NMC) was incorporated in the year 1975 and is the largest private healthcare company in the UAE. It provides healthcare services internationally with the U.A.E (United Arab Emirates) and Spain being the major markets.

Recent News
On 17th January 2020, NMC Health announced the retention of Louis Freeh. Louis Freeh is former FBI Director and Federal Judge. Mr Freeh’s firm FGIS (Freeh Group International Solutions LLC) will examine the allegations raised by Muddy Waters on 17th December 2019 and will compile a report for the same. In response to the allegations by Muddy Waters Research, the company stated all the accusations are misleading, containing many errors of fact, baseless and appear principally unfounded. 

Capital Markets Day Update
On 21st October 2019, NMC Health announced decent performance in the second half of the financial year 2019, while the full-year guidance was restated. The company’s strategy is offering a substantial advantage in all the main markets in which it operates. The company expected double-digit growth in top-line and the bottom-line performance in FY2020. In the financial year 2019, the company’s top line is expected in the range of US$2,500-US$2,540 million at Post-IFRS 16 and Pre-IFRS 16 basis. The net income to equity holders for the financial year 2019 expected to be in the range of US$297-US$305 million at Post-IFRS 16 (US$320-US$330 million at Pre-IFRS 16 basis). The net debt to EBITDA would be below 3.4 times in the financial year 2019. The company is expecting robust double-digit organic revenue and EBITDA growth in FY2020. The aforementioned facilities are anticipated to contribute towards the revenue of US$45-US$55 million in 2020 and, as a result of being in the initial ramp-up phase, it estimated a US$18-20 million of loss at the EBITDA level from new projects (post-IFRS 16) in 2020. Growth capex is expected at US$90-US$100 million, while maintenance capex is expected to be around 3 per cent of revenues for the year.

Share Price Performance

Daily Chart as of  January 17^th, 2020, before the market close (Source: Thomson Reuters)

NMC Health Plc shares were trading at GBX 1,541.50 at the time of writing before the market close (at 12:03 PM GMT) on 17^th January 2020 and were up by 6.94% versus the previous day closing price. Stock's 52 weeks High is GBX 3,059.00 and Low is GBX 1,192.00.The shares of the company have delivered a positive return of 14.11 per cent in the last week. The company’s stock has given investors 41.89 per cent of a negative return in the last three months.

Conclusion
The company said that they would report a favourable performance in the second half of the financial year 2019. Consequently, the financial year 2020 is expected to deliver double-digit growth in the top line and bottom line. The company’s management is expected to open four new hospitals: two in Oman and two in the UAE. These facilities will improve the total capacity of up to 380 beds. At the end of 2019, the company has opened a ten-bed cosmetics hospital in Dubai. The company is expected to reduce the debt in H2 FY2019.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 1,441.50 (as on 16th January 2020).

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