ICG Enterprise Trust Plc (LON: ICGT)

Business Overview
London based ICG Enterprise Trust Plc is a Private Equity company, focusing on delivering long-term capital growth through investment in unquoted companies (privately held companies) mainly in Europe and the US. They do not put their investments in start-ups or early-stage companies. Their portfolio comprises of large buy-outs, mid-size buy-outs and small size buy-outs.

Recent News
On 23^rd January 2020, the company announced that Jane Tufnell, non-executive director, had been appointed as the Chair-designate of the company. She would replace Jeremy Tigue who had resigned from the Group.

Financial Highlights – Q3 FY20
The investment portfolio of ICG stood at £782.6 million at the end of October-31-2019. The company reported strong performance across the portfolio for the nine months, the company reported a 12.4% return on its portfolio for the nine months and on a constant currency basis reported return on portfolio stood at 12.6%. ICG’s Portfolio remained highly cash generative during Q3 FY20: Company received proceeds of £37.7 million during the third quarter of 2020. High conviction investment opportunities: During the quarter, the company deployed £34.1 million into new investments. Investment opportunities remained focused on defensive growth, downside risk protection and relative value. Dividend: During the third quarter, the company announced a dividend of 5 pence. The dividend for nine months stood at 15 pence.

Share Price Performance

Daily Chart as on 18^thMarch 2020, before the market closed (Source: Thomson Reuters)

On March 18, 2020, at the time of writing (before the market close, at 1:37 PM GMT), ICG Enterprise Trust Plc shares were trading at GBX 618, down by 4.63 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 1,015/GBX 510. 

From the technical standpoint, 14 days-Relative Strength Index of the stock is hovering near the oversold zone, which is strengthening the upside move.

Conclusion
The results were moderate, with strong realisations being a significant contributor. But like most fund of funds, there is likely to be some pressure on valuations for the final quarter of 2020. The critical risks for the company are uncertainties around Coronavirus and increasing chances of global recession, which would dent the investment portfolio of the company significantly. In an environment of rising volatility and economic uncertainty, we believe ICGT’s focus on defensive growth portfolio will prevent shareholders from uncertainties and continue to generate value for shareholders.

Based on the above rationale, we have given a “BUY” recommendation at the current price of GBX 510 (as on 18^th March 2020 before the market close at 4:27 PM GMT).

SDL Plc (LON: SDL)

Business Overview
SDL Plc is a small cap FTSE listed Software & Computer Services company and provides content management solutions. SDL works with Donnelley Language Solutions to provide innovation in language. Many big brands have trusted upon the company’s expertise in language translation and digital content management. SDL is presently working with 90 out of the top 100 global brands.

Recent News
On 27^th January 2020, the company announced that it had appointed Gordon Stuart as an independent Non-Executive Director of the Audit, Nomination and Remuneration Committees.

Trading Updates – Financial Year 2019
On 21^st January the company announced its trading updates for the fiscal year 2019. It expected revenue and adjusted operating profit for 2019 to be significantly ahead of 2018 and in line with market expectations. The Group reported net cash of GBP 26.4 million at 31 December 2019 as compared to GBP 14.4 million at the end of 31^st December 2018.

SDL will announce its full year results on 25^th March 2020.

Share Price Performance

Daily Chart as on 18^thMarch 2020, before the market closed (Source: Thomson Reuters)

On March 18, 2020, at the time of writing (before the market close, at 1:23 PM GMT), SDL Plc shares were trading at GBX 405, up by 1.25 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 640/GBX 380. 

From the technical standpoint, 14 days-Relative Strength Index of the stock is hovering near the oversold zone, which is strengthening the upside move.

Valuation Methodology

*Peers: Draper Esprit Plc, Paypoint Plc, NCC Group Plc, Ideagen Plc and Softcat Plc

 
Conclusion
In the recent trading updates announced by the company, it reported revenue and adjusted operating profit to be ahead of the last year which shows the Group is growing and its business is performing. The company had shown decent financial performance for the first half of the financial year 2019 also. Both the top-line and bottom-line performance for the period have improved. The company is benefited by the exchange rate between the US Dollar and the Pound Sterling.

The company had successfully acquired and merged DLS (Donnelley Language Solutions), which would improve and accelerate innovation in the language. The company ends the second half with decent sales momentum and increased sales pipeline.

The company had improved its customers’ satisfaction and all investments done since 2016 would result in long term growth of the company. Being an IT company, the SDL needs to invest heavily in innovation and system maintenance, any failure to do so could impact the brand royalty and may affect the company’s financial performance.

Based on the decent prospects which are supported by valuation done using the above method, we have given a “Speculation Buy” recommendation at the current price of GBX 391 (as on 18th March 2020 before the market close at 12:32 PM GMT) with lower double-digit upside potential based 14.15x NTM Price/Earnings Value (approx.) on FY20E earnings per share (approx.).
 
 
*All forecasted figures have been taken from Thomson Reuters.

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