Clinigen Group PLC

Clinigen Group Plc (CLIN) is a UK based Pharmaceuticals & Biotechnology company which is involved in the activities related to distribution, sale and management of pharmaceutical products. The company has divided its operations into three reportable segments being Clinical Trial Services, Unlicensed Medicines and Commercial Medicines.

Financial Highlights (for the year ended 30 June 2019, £million)
For the financial year ending 30th June 2019, the company’s revenue was up by 20 per cent(reported basis) to £456.9 million as against £381.2 million in FY2018. The increase in the revenue was driven by an increase in the performance of Commercial Medicines and Clinical Trial Services business segments. With the increase in the administrative expenses for the period, the statutory operating profit declined to £24.4 million in FY2019 from £41.5 million in FY2018.

The company’s reported PBT (Profit before tax) declined to £12.3 million in FY2019from £35.9 million in FY2018. The company’s reported PAT (Profit after tax) declined to £5.2 million in FY2019 from £27.4 million in FY2018. The basic earnings per share were at 4 pence in FY2019 versus 22.9 pence in FY2018. The full-year dividend per share surged by 20% to 6.7 pence against the previous year data.

Share Price Performance

Daily Chart as at October-23-19, before the market closed (Source: Thomson Reuters)

On 23rd October 2019, Clinigen Group PLC shares were trading at GBX 792.50 at the time of writing before the market close (at 1:30 PM GMT), down by 0.565% against the previous day closing price. Stock's 52 weeks High and Low are GBX 1,069/GBX 716. The company’s stock beta stood at 0.99, reflecting almost the same movement of the stock as compared to the benchmark index.

Conclusion
From the perspective of macro market trends, the increased demand for access to medicines has increased the risk and dangers of counterfeit and substandard medicines entering the supply chain. The impact of Brexit could affect the Group’s ability to ship product efficiently in and out of the UK and the EU.

The company is well-positioned to continue to develop the business as well as drive organic growth over the medium-term and deliver another good year of progress. Both the top-line and the bottom-line performance expanded for the current period. The company is looking forward to attaining market-leading position through acquisitions of business and products, which is also helping the company to increase its geographical footprint and commercial infrastructure. The robust balance sheet is facilitating the company to be in a good position to drive growth in all businesses in the coming years.

Over the course of 5 years (FY14 - FY19), the company’s revenue surged from £126.6 million in FY14 to £456.9 million in FY19. Compounded annual growth rate (CAGR) stood at 29.26 per cent.

Based on the decent prospects, we have given a "Speculative Buy" recommendation at the current price of GBX 792.50 (as on 23rd October 2019, before the market close).
 

Codemasters Group Holdings Plc

Codemasters Group Holdings Plc (CDM) is a developer and publisher of video games. The company is specialized in high-resolution racing games and has a 30-year successful track record of producing games. The company was incorporated in Southam, Warwickshire and is among the top game developers and publishers in Britain.

On 26^th November 2019, the company will announce the interim 2020 earnings.

Trading Update (as on 9^th October 2019)
The company announced the trading update of its half-year ended 30 September 2019 ('H1 FY20'). For the six-month period, the group has generated revenue of £39.8 million, a slight increase from the corresponding period of the last year. Digital sales as a proportion of revenue continue to surge, representing 61.7 per cent of total sales in the current period against the 53 per cent in H1 FY19. Gross margin stood at 89.3 per cent. On 30^th September 2019, the company had net cash of £24.6 million, an increase of £7.6 million against the £17 million in H1 FY19.

Financial Highlights (for the year ended 31 March 2019, £’000)

(Source: Annual Report, Company Website)

In the financial year 2019, the company’s reported revenue increased by 11.9 per cent to £71.2 millionas compared with the financial year 2018 of £63.6 million, due to the performance of the major releases in the year (F1® 2018, DiRT Rally 2.0 and ONRUSH). In FY19, the gross margin rose by 3 per cent to 87.6 per cent against the previous year period. Adjusted EBITDA performance of £18.7 million (FY 2018: £11.7 million) was ahead of the anticipations set at the time of the IPO. Adjusted earnings per share stood at 13.3 pence in FY19, an increase of 5.2 pence from the 8.1 pence in FY18. On 31^st March 2019, the company’s net cash was £18.2 million.

Share Price Performance

Daily Chart as at October-23-19, before the market closed (Source: Thomson Reuters)

On 23rd October 2019, Codemasters Group Holdings PLC shares were trading at GBX 214 at the time of writing before the market close (at 12:31 PM GMT), down by 0.47% against the previous day closing price. Stock's 52 weeks High and Low are GBX 269/GBX 130.

Valuation Methodology

Key Risks
Launch of new titles and next generation of consoles, single genre & deterioration of F1®, currency risk, market growth, new developments and changing technology, Video Games Tax Relief (‘VGTR’), and Brexit.

Conclusion
The group will shortly be announcing GRID, its first announcement of this franchise since 2014. The announcement of the GRID has been timed to take benefit of the peak release season, and close to the November 2019, the launch of Google's cloud gaming service Stadia, which features GRID as a launch title.

As per the trading update of the first half of 2020, the company will deliver strong financial performance and the board is confident that the results for the full year will be in line with its anticipations. Trading in the H1 FY20 was benefitted from the launch of the annual instalment of the F1 franchise, F1 2019, on 28th June 2019, as well as the group's back catalogue of games. The group expects that F1 2019 will still gain from the normal promotions around Christmas and the Black Friday periods, which have historically delivered robust sales for previous versions of the F1 game. The performance of the group’s back catalogue has also been robust, reflecting the longer life cycle of high-quality products. The group anticipates digital progress to persist with future releases. The company had shown an increase in financial performance in the first half of the financial year 2020. Also, both the top-line and the bottom-line have increased in the financial year 2019 period.

Based on the decent growth prospects of the company and the valuation done using the above method, we have given a “SPECULATIVE BUY” recommendation at the closing price of GBX 213 (as on 22^nd October  2019) with single-digit upside potential based on 18x Industry Median Price to Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters.
*The “Speculative Buy” recommendation is also valid for the current price as covered in the report (as on 23rd October 2019).

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