M&G Plc (LON: MNG)

Business Overview
M&G Plc is a United Kingdom-based and prominent savings and investments company, which operate investments for both large institutional and for individuals’ investors, such as pension funds, around the world. The company’s investments support people to prosper by putting their savings and investments to work in the economy.

Recent News
On 1^st April 2020, the company announced that it had appointed Massimo Tosato as a Non-executive Director with immediate effect.

Financial Highlights-FY2019

(Source: Preliminary Report, Company Website)

In the fiscal year 2019, the company’s AUMA increased to GBP 352 billion as compared to GBP 321 billion in the financial year 2018 due strong investment returns over the year. The adjusted operating profit before tax decreased from GBP 1,621 million in FY18 to GBP 1,149 million in FY19. During the period total capital generation was GBP 1,509 million versus GBP 2,369 million in FY2018. In the fiscal year 2019, the pro forma group Solvency II ratio stood at 176 per cent.

Share Price Performance  

Daily Chart as on 1^stApril 2020, after the market closed (Source: Thomson Reuters)

On April 1, 2020, at the time of writing (after the market close), M&G Plcwere closed at GBX 109, down by 3.20 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 252.56/GBX 86.40. 

Valuation Methodology

*Peers: Aegon NV, Banca IFIS SpA and Just Group Plc

Conclusion
From long-term economic and social trends, the company is well-positioned to benefit that offer growth opportunity for many years to come.  The company has a decent track record of value creation for its stakeholders and delivering the other objectives as an independent business. The company’s business is conducted in a highly competitive environment with a developing demographic trend, and continued profitability depends upon management’s ability to respond to these pressures and trends. The implementation of complex strategic initiatives gives rise to significant execution risks, which may affect the operational capacity of the company and may adversely impact the Group if these initiatives fail to meet their objectives. The Group’s business is exposed to economic and market fluctuations, which may adversely affect the Group’s business and its financial performance. A decline in equity or property markets or an increase in volatility in equity or property markets may adversely affect the investment portfolio and profitability of the Group. Several risks are interest rate volatility, exchange rate fluctuations, and credit risk and counterparty risk.

Therefore, based on the above rationale, we have given a “Watch” recommendation at the closing price of GBX 109 (as on 1^st April 2020), while we look for the growth catalysts in the near-term.

SIG Plc (LON: SHI)

Business Overview
SIG Plc is a Sheffield, the United Kingdom-based distributor of building products in Europe. The group is involved in the supply of expert products to construction and related markets. The company’s business is differentiated into two segments: UK & Ireland and Mainland Europe.

Recent News
On 30^th March 2020, the company announced that the temporary closure of its UK and Ireland trading sites in response to the evolving Covid-19 situation.

Trading Updates - FY2019
The company expected the underlying profit before tax for the year would be in line with the guidance of GBP 42 million. The Group would announce its annual results during the last week of April 2020. The Group hadreportedan operating loss of GBP 9millionfor the first two trading months of the year with like-for-like sales down by 11per cent. 

 The company has engaged with the local authorities across its end-markets, providing services and support to its customers.
 
Share Price Performance  

Daily Chart as on 1^stApril 2020, after the market closed (Source: Thomson Reuters)

On April 1, 2020, at the time of writing (after the market close), SIG Plcwere closed at GBX 20, down by 13.16 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 154/GBX 18.74. 

Valuation Methodology

*Peers: Taylor Wimpey Plc, Tyman Plc, Redrow Plc, Costain Group Plc and Kier Group Plc

Conclusion
The company’s growth during the financial year 2019 has been hampered. Its LFL sales are dropping. Some improvements in its gross margins are expected and the company expected to reduce its operating cost during the fiscal year 2020. Further reductions in levels of working capital has helped the company to reduce its net debt at 31 December 2019 to GBP 162 million (2018: GBP 189 million). However, the group currently facing a challenging economic environment and the continuing weak levels of market demand in the building and construction markets, including macro-economic uncertainty due to Brexit. Some additional risks are the Delivery of the change agenda, Data quality, Market downturn, Supplier rebates which could affect the revenue, operations and profitability of the company. Internal or external cyber-attacks and a critical data breach could result in system disruption of loss of sensitive data which could hamper the operations of the company. The market environment in which company operates has low growth potential which could impact on company’s profitability. The company operates in multiple locations and any change in the economic and political policy could hamper the company’s operating performance.

Based on the risks factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 20 (as on 1st April 2020, after the market close), with support from few catalysts needs to be evaluated at a later stage.
 
*All forecasted figures and information have been taken from Thomson Reuters. 

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