Cairn Energy Plc (LON: CNE)

Business Overview
Cairn Energy Plc is a UK based independent oil and gas production and exploration company.

Recent News
On 10th March 2020, Cairn Energy announced the selection of Erik B. Daugbjerg. Mr Daugbjerg will hold the responsibilities of director non-executive effective from 14th May 2020.

Financial Highlights – Financial year 2019

(Source: Preliminary Report, Company Website)

For the financial year ending 31st December 2019, driven by an increase in the oil sales for the period, the group’s revenue increased to USD 533.4 million versus USD 410.3 million in FY2018. The gross profit stood at USD 243.1 million in FY2019 versus USD 107.7 million in FY2018. Driven by lower operating expenses for the period, the group reported an operating profit of USD 154.9 million in FY2019 versus an operating loss of USD 129 million in FY2018. The company’s PBT (profit before tax) from continuing operations stood at USD 119.5 million in FY2019 as against an LBT (loss before tax) from continuing operations of USD 1,211.6 million in FY2018. The profit attributable to the shareholders stood at USD 93.6 million in FY2019 versus loss attributable to the shareholders of USD 1,135.5 million in FY2018. The basic earnings per share stood at 16.08 cents in FY2019 versus a basic loss per share of 195.59 cents in FY2018. The diluted earnings per share stood at 15.92 cents in FY2019 versus a diluted loss per share of 195.59 cents in FY2018.

Share Price Performance  

Daily Chart as on 24^thMarch 2020, before the market closed (Source: Thomson Reuters)

On March 24, 2020, at the time of writing (before the market close, at 12:31 PM GMT), Cairn Energy Plc were trading at GBX 77.15, up by 12.70 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 216.80/GBX 57.35.
 
Conclusion
The company has recorded decent financial performance for the financial year 2019. The company has shown good top-line and the bottom-line performance for the period. In the current operational update, Cairn shows a good increase in production. It also looks forward to the results of the exploration drilling programme in Mexico. The group expects first oil from Senegal-Sangomar field in the year 2023 with gross production of 100,000 bopd. The recent crisis between Saudi Arabia and Russia over oil price crises resulted in the share price to fall.

Based on the above rationale and decent fundamental growth potential, we have given a "BUY" recommendation at the closing price of GBX 68.45 (as on 23rd March 2020).

On the Beach Group Plc (LON: OTB)

Business Overview
On the Beach Group Plc is a UK-based online travel agent offering a range of hospitality products bookable through its online channels.

COVID-19 and Trading Updates
On 28th February 2020, On the Beach Group released an update for a trading period post-COVID-19 breakthrough. The group witnessed a small but noticeable decline in the demand for 2020 Summer, which resulted in a reduction in marketing spend. The group’s board expects not to achieve payback on its outlined strategic marketing investment in the current fiscal year. The company forecast full-year results in 2020 to be below market expectations, due to disruption caused by COVID-19. The company based on its asset-light business model, tight cost and cash controls and low inventory risk show resilience against the volatile market environment and will return to profit after market conditions normalise.

Share Price Performance  

Daily Chart as on 24^thMarch 2020, before the market closed (Source: Thomson Reuters)

On March 24, 2020, at the time of writing (before the market close, at 12:59 PM GMT), On the Beach Group Plc were trading at GBX 152.40, up by 1.55 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 500/GBX 112.60. 

Valuation Methodology 


Conclusion
Although the group’s financial performance has been impacted, due to outbreak of coronavirus as it resulted in a decline in demand. But the company remained resilient against a volatile market environment, based on its asset-light business model, tight cost and cash controls and low inventory risk. The board expect to return to profit post-market conditions normalises. However, future growth looks promising as the company is one of the strongest players in the tour & travel business. The group based on a strong pipeline of opportunities is looking forward to achieving its long-term mission of becoming leading beach holidays online retailer in Europe. The company disrupt the online retail market of beach holidays through strong customer-value proposition, low-cost base and innovative technology.

Over the course of 4 years (FY15 - FY19), the company’s revenue surged from GBP 63.1 million in FY15 to GBP 140.4 million in FY2019. Compounded annual growth rate (CAGR) stood at 22.13 per cent.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Buy” recommendation at the current price of GBX 140.80 (as on 24th March 2020, before the market close at 8:36 AM GMT) with lower double-digit upside potential based on 8.70x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
 
*All forecasted figures and information have been taken from Thomson Reuters.
*The “Buy” recommendation is also valid for the current price as covered in the report as on 24^th March 2020.  

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