Electrocomponents Plc

Electrocomponents Plc (ECM) is a global distributor of electronic and industrial products using multiple channels. The company offers over 500,000 products sourced from more than 2,500 suppliers. 

Trading Statement (For the four months to 31st January 2020)

(Source: Quarterly Report, Company Website)
 
On 4th February 2020, the company announced its trading update for the four months period ended on 31st January 2020. During the four months period to 31st January 2020, the Group’s like-for-like revenue grew by 2 per cent as compared to the same period in the last year. The company has witnessed modest growth and continued market share gains across the geography despite the uncertainties and challenging conditions in some of its active markets. The like-for-like revenue growth declined in Central Europe due to slow performance in Germany. The RS Pro business performed well with a growth of 10 Per cent on like-for-like basis, while the revenue fromDigital business on like-for-like basis remained in line with group expectations. Due to the impact of product mix, the group expect its gross margin for full-year to decline.
 
Share Price Performance

Daily Chart as of March 19^th, 2020, before the market close (Source: Thomson Reuters)

Electrocomponents Plc shares were trading at GBX 485.3 at the time of writing before the market close (at 8:45 AM GMT) on 19^th March 2020 and up by 0.96% versus the previous day closing price. Stock's 52 weeks High is GBX 731.20 and Low is GBX 397.30.

Valuation Methodology

*Peers: Pendragon Plc, DCC Plc, Ferguson Plc, Hay Plc and Pagegroup Plc.

Conclusion
The four months period to 31st January 2020 of the fiscal year 2020 saw revenue progress and gains in the market share, despite an uncertain market backdrop. The company would maintain to drive share and vigorously manage the operating costs. The company has increased investments in strategic initiatives which would benefit the growth of the business. The company is trying to position itself for the significant market opportunity in the longer term. Electrocomponents is well-positioned in the industry and could deliver good progress in the future. The Group’s prospects look good, and it could be an attractive opportunity for investors to invest for the long term.

Over the course of 3 years (FY16 - FY19), the company’s revenue surged from GBP 1,291.1 million in FY16 to GBP 1,884.4 million in FY19. Compounded annual growth rate (CAGR) stood at 13.42 per cent.

Based on the decent prospects and supported by valuation done using the above method, we have given a "BUY" recommendation at the current price of GBX 465.40 (as on 19^th March 2020, before the market close at 8:51 AM GMT) based on 12.75x NTM Price/Earnings multiple (approx.) on FY20E earnings per share (approx.).

Computacenter Plc

Computacenter Plc (LON: CCC) is a Hatfield, the UK headquartered company engaged in the business of providing information technology infrastructure services.

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

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, driven by an increase in the service revenue and technology sourcing revenue, the revenue increased by 16.1 per cent to GBP 5,052.8 million from GBP 4,352.6 million in FY2018. The operating profit increased from GBP 109.3 million in FY2018 to GBP 147 million in FY2019. The Adjusted PBT (profit before tax) went up by 23.8 per cent to GBP 146.3 million in FY2019 versus GBP 118.2 million in FY2018. The PBT (profit before tax) increased by 30.4 per cent to GBP 141 million in FY2019 from GBP 108.1 million in FY2018. The adjusted diluted earnings per share stood at 92.5 pence in FY2019 versus 75.7 pence in FY2018, reflecting an increase of 22.2 per cent. The statutory diluted earnings per share stood at 89 pence in FY2019 versus 70.1 pence in FY2018, reflecting an increase of 27 per cent. The dividend per share surged by 22.1 per cent to 37 pence in FY2019 from 30.3 pence in FY2018.
 
Share Price Performance
 

Daily Chart as of March 19^th, 2020, before the market close (Source: Thomson Reuters)

Computacenter Plc shares were trading at GBX 975.00 at the time of writing before the market close (at 9:07 AM GMT) on 19^th March 2020 and down by 1.76% versus the previous day closing price. Stock's 52 weeks High is GBX 1,950.00 and Low is GBX 967.00.

Valuation Methodology

*Peers: Micro Focus International Plc, Avast Plc, SDL Plc and Softcat Plc.

Conclusion
The company had shown decent growth in the financial performance for the financial year 2019. Both the top-line and the bottom-line performance for the period have improved. The company had generated good revenue from its Technology Sourcing business for the period.

The industry’s Momentum is expected to remain positive as customers are continuously looking-forward to invest to digitalise their businesses. The Momentum in the industry is backed by improved operational capability resulted in improved quality and reduced operational cost. The outbreak of COVID-19 adversely impacted the performance of the company, and it is evaluating the impact of the outbreak on the FY2020 financial performance.
Based on the decent prospects and supported by valuation done using the above method, we have given a "BUY" recommendation at the current price of GBX 950.02 (as on 19^th March 2020, before the market close at 8:10 AM GMT) with single-digit upside potential, based on 12.00x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and peer’s information have been taken from Thomson Reuters. 

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