Land Securities Group Plc

Land Securities Group Plc (LON: LAND) is an LSE-listed holding Company. The Company makes an investment in real estate sector which includes shopping centres, shops and offices.

The Company will release FY2021 results on 18 May 2021.

Investment Highlights - Land Securities Group Plc – Expensive at GBX 719.40

• Due to the covid-19 pandemic, the Company’s portfolio is adversely impacted operationally and on valuation basis.
• The Company has delivered a negative ROE (Return on Equity) of 10%, which is lower than the industry median of 0.6%. The Company’s ROE is continuously declining for last 3 years.
• As per valuation metrics, the EV/Sales multiple of the Land Securities Group Plc is currently higher as compared to the corresponding multiple of the Residential & Commercial REITs industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is supporting a downside move (around 67 level), which means the stock price could decline in the short term.

Key Risks

• The new strain of Covid-19 has caused disruptions in the business environment of the Company.
• Failure to achieve the anticipated cost-saving measures could put pressure over margins.

Financial Highlights – H1 FY2021 (30 September 2020) (released on 10 November 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2021, due to the impact of the covid-19 pandemic on business performance, the revenue declined significantly by 48.9%.
• Due to the lower revenue, the profitability margins declined for the period on reported and adjusted basis. The Company reported an increase in loss before tax to £835 million in H1 FY2021.
• The Company’s dividend per share declined by 48.3% in H1 FY2021, and net asset per share declined by 9.6%.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price/Earnings (NTM) (Illustrative)

Conclusion

The Company has reported lower financial performance in the first half of the financial year 2021. Both the revenue and bottom-line performance declined, while profitability remained in the negative zone. Despite the lower financial performance, the Company proactively address the challenges presented by the Covid-19 pandemic and have a strong financial position. Land Securities Group’s business was impacted by covid-19 and affected Company’s operational performance and portfolio valuations. The Company expects same trend to continue in the second half of the financial year 2021. Presently, the Company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of GBX 474.75 and GBX 732.80, respectively.

Based on the factors as highlighted above, we believe the stock of Land Securities Group Plc is “Expensive” at the current price of GBX 719.40 (as on 8 April 2021 at 12:00 PM GMT), with support from few catalysts needs to be evaluated at a later stage such as proactive approach in rent collection and strong financial position.

Hurricane Energy Plc

Hurricane Energy Plc (LON: HUR) is a United Kingdom-based oil production and exploration Company, which mainly focused on naturally fractured basement reservoirs.

Investment Highlights - Hurricane Energy Plc – Avoid at GBX 2.54

• The Company’s financial performance is significantly impacted by the volatility in oil prices, which resulted in higher impairment charges and lowered profitability.
• As per valuation metrics, EV/EBITDA and Price/Book multiples of the Hurricane Energy Plc are currently higher as compared to the corresponding multiples of the Oil & Gas industry, reflecting overstretched valuations.
• In the last one year, the Company delivered a negative return of 80.66%, and delivered significantly lower returns compared to the benchmark Index (FTSE-AIM Index).
• From the technical standpoint, shares were trading below the short-term support level of 20-day simple moving average prices of GBX 3.23, which reflects a downtrend in the stock and can decline further.

Key Risks

• The decline in oil prices can impact the cash generation and profitability of the Company.
• The Coronavirus outbreak could hamper the supply chain and impact the business of the Company.
• Global political uncertainty regarding trade policy also poses a risk for the Company.

Trading & Operational Update (released on 14 January 2021)

• The Company’s production in final four months of 2020 stood within guidance and was averaged at 12,500 bopd.
• The revenue for FY2020 stood at $179 million and Realised annual weighted average oil price stood at $35/bbl.
• The net free cash as on 31 December 2020 stood at $106 million (30 November 2020: $87 million).

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company’s production stood in line with expectations in December. The Company’s net free cash increased by $19 million, reflecting higher oil prices and maintained production. The recovery in oil prices will further improve value in West of Shetland portfolio. Hurricane Energy’s Lancaster field at current oil prices and production levels is generating positive cash flow. The Company’s oil production in Q4 was lower than the Q3 production level, while it remained in set guidance range of 12,000 - 14,000 bopd. The Company at Lancaster field continue to produce from 205/21a-6 well alone on artificial lift and around 25% of water cut. At present, the Company is engaged with shareholders on proposed development plan for Lancaster and related funding to maximise asset value. The stock made a 52-week low and high of GBX 2.15 and GBX 16.75, respectively.

Based on the headwinds faced by the Group, we have given an "Avoid" recommendation for Hurricane Energy Plc at the current price of GBX 2.54 (as on 8 April 2021 at 12:29 PM GMT), while we watch for the opening of 205/21a-7z well to assist in the Lancaster reservoir refinement.

*Dividend Yield may vary as per the stock price movement.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

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