N Brown Group Plc (LON: BWNG)

Business Overview
N Brown Group Plc is a Manchester, United Kingdom-headquartered digital fashion retailer, which designs, sources and creates own-range and branded fashion and homewares and focuses on catering underserved customer groups, and operates a trusted family of retail brands, focused on fashion that fits. The company has an extensive range of products, predominantly homewares, footwear and clothing, and offers in-house ranges, such as Label J and Black Label, alongside international brands.

Recent News
On 29^th January 2020, the company announced that Rachel Izzard would join the company in place of Craig Lovelace as a Chief Financial Officer.

The Group has also appointed Vicky Mitchell as a Non-Executive Director. He would be joining the company with immediate effect.

Trading Update – 18 weeks to 4^th January 2020
The company announced the trading update for the 18-week period to 4th January 2020. In the current period, the company’s digital revenue surged by 2.5%, due to robust growth at Ambrose Wilson and Simply Be. The product revenue for the 18-week period to 4th January 2020 was down by 4%, driven by a decrease of legacy brands. In financial services, the revenue decreased by 4.6% in the current period. On year on year basis, the womenswear and menswear revenue increased by 6.7% and 3.2%, respectively from digital and 1.1% and 2.5% from other.

Share Price Performance

Daily Chart as on 7^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 7^th, 2020, N Brown Group Plc shares were trading at GBX 78.25 at the time of writing before the market close (at 8:26 AM GMT), up by 1.76 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 163.90/GBX 74.35. The stock price has givennegative 9.01 per cent returns during the previous year. In the last one month, the stock price has given negative 47.12 per cent returns. And, now some pull back relief rally is expected.

Valuation Methodology
 

Conclusion
In the last few months, the Group is going through changes in higher management, changes in directors which could be the beginning of new strategies and initiatives. The company operates in a competitive industry, excessive competition could impact the profitability of the company. Any changes in regulations or government policies could affect the overall business of the Group. Loss of consumer confidence in the company could affect its revenue and profitability. Failure in cybersecurity and critical data breach could hamper the operations as well as the reputation of the Group. In the latest trading update, N Brown Group Plc has witnessed a revenue growth in its digital segment. The company expected FY20 adjusted profit before tax to be in the range of GBP 70 million to GBP 72 million. The Group is making good progress with its ongoing strategic review which would benefit in the cost reduction and improve the business. It could be an attractive stock to buy at current levels.

Based on the decent growth prospects and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 76.90 (as on 6th February 2020) with high single-digit upside potential based on 6.1x NTM EV/EBITDA (approx.) on FY20E EBITDA (approx.).

Bellway Plc (LON: BWY)

Business Overview
Bellway Plc is a United Kingdom-headquartered housebuilding company. It is one of the UK’s largest housebuilders, with operations in over 22 divisions. The company offers an extensive choice of property range, extending from one-bedroom apartments to six-bedroom family homes, also providing homes to housing associations for social housing.

Recent News
On 7^th February 2020, the company announced its H1 trading update for FY2020. The period ended on 31^st January 2020.

Trading Update - H1 FY2020 (31^st January 2020)
During the first half of the fiscal year 2020, volume of new homes grew by 6.3 per cent to 5,321 as compared to 5,007 in the first half of the fiscal year 2019. Overall reservation rate increased by 6 per cent to 194 per week against 183 per week in H1 FY2019. The company’s housing revenue grew by around 4 per cent to GBP 1,525 million versus GBP 1,471.2 million in H1 FY2019. In H1 FY2020, 7,005 plots were contracted (2019 – 5,980 plots). The Group has a decent sales guidance, with an impressive order book of 4,598 homes (2019 – 4,587 homes) and a value of GBP 1,163.1 million (2019 – £1,171.3 million). The company expected profit before tax to be in line with market estimates for the full year.

The company will announce its interim results on 25^th March 2020.

Share Price Performance

Daily Chart as on 7^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 7^th, 2020, Bellway Plc shares were trading at GBX 3,999 at the time of writing before the market close (at 10:48 AM GMT), down by 1.53 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 4,164/GBX 2,656. The stock price has given43.08 per cent returns during the previous year. In the last three months the stock price has given 26.32 per cent returns.

Conclusion
During the first half of the fiscal year 2020, trading has stayed robust, with the company achieving 194 reservations per week, a surge of 6%. On 31^st January 2020, the order book stood healthy and included 4,598 homes with a total value of GBP 1,163.1 million. This was due to the higher number of completions recorded in this short trading period, a reflection of good on-site construction progress. With continued availability of Help-to-Buy, good access to affordable mortgage finance and high employment supporting strong demand for affordable homes, conditions in the new build UK housing market remain positive. Specifically, following the progress potential afforded by investment in the additional new divisions of London Partnerships and Eastern Counties, the company has the capacity to increase output to 13 thousand homes per annum. Over the medium-term period, there is an opportunity to expand beyond this, with an additional new division.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 3,972 (as on 7th February 2020 before the market close at 9:20 AM GMT).
 
*All forecasted figures and information have been taken from Thomson Reuters.
*The “Speculative Buy” recommendation is valid for the current price as covered in the report (as on 7^th February 2020).

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