Reach Plc

Reach Plc (LON: RCH) is a West Sussex, United Kingdom-headquartered largest commercial national and regional news publisher in the country, with market-leading regional titles including the Birmingham Mail, Liverpool Echo, Manchester Evening News, and influential and iconic brands such as the Daily Mirror, Daily Express, Sunday People.

Financial Highlights – Financial Year 2019 (29^th December 2019, GBP, million)

(Source: Annual Report, Company Website)
 
For the financial year ending 29th December 2019, the company’s revenue declined by 3 per cent to GBP 702.5 million as against GBP 723.9 million in FY2018. The adjusted operating profit surged by 5.4 per cent to GBP 153.4 million in FY2019 from GBP 145.6 million in FY2018, reflecting a decline in adjusted operating items. The company’s statutory operating profit stood at GBP 131.7 million in FY2019 versus an operating loss of GBP 107.6 million in FY2018. The adjusted PBT (profit before tax) surged by 6.1 per cent to GBP 150.6 million in FY2019 from GBP 141.9 million in FY2018. The company’s statutory PBT (profit before tax) stood at GBP 120.9 million in FY2019 versus an LBT (loss before tax) of GBP 119.9 million in FY2018. The adjusted earnings per share went up by 4.8 per cent to 41.1 pence in FY2019 versus 39.2 pence in FY2018. The dividend per share increased by 6.7 per cent to 6.55 pence in FY2019 from 6.14 pence in FY2018.

Share Price Performance

Daily Chart as of February 24^th, 2020, before the market close (Source: Thomson Reuters)

Reach Plc shares were trading at GBX 179.28 at the time of writing before the market close (at 1:25 PM GMT) on 24^th February 2020 and up by 2.68% versus the previous day closing price. Stock's 52 weeks High is GBX 184.80 and Low is GBX 57.50.

From the technical standpoint, 3 days 9 days and 14 days relative strength index of the stock were not favourable, and prices could fall further from the current trading level.

Valuation Methodology


Key Risks
In the media market, the company operates in a very dynamic environment. It is evolving and changing rapidly and becoming progressively competitive. The most significant risk is the likely impact on the wider advertising market. The company is increasingly exposed to foreign exchange risk for overseas operations.

Conclusion
The company has shown improvement in the financial year 2019. Despite the decline in the top-line performance, the bottom-line performance had improved significantly for the period. The group’s operations are impacted by the ongoing political and economic uncertainties and its impact on the demand for advertising.

An economic downturn could affect the demand TV Broadcasters, and the media is exposed to global political and economic events and trends, leading to a risk to business operations from external factors.  Currently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited.

Based on the headwinds faced by the group and supported by valuation done using the above method, we have given an "AVOID" recommendation at the current price of GBX 184.80 (as on 24th February 2020, before the market close at 8:40 AM GMT).  

Bahamas Petroleum Company Plc

Bahamas Petroleum Company Plc (LON: BPC) is an oil & gas producers company making an investment in offshore oil exploration project covering an area of approximately 16,000 sq. Km. The company primarily operates in the maritime EEZ (Exclusive Economic Zone) and territorial waters in the geographic region of Bahamas.

Funding Strategy and Convertible Loan Facility Update
On 20th February 2020, Bahamas Petroleum Company announced the entering into loan note facility. The loan note facility will be binding unsecured convertible, second-ranking, zero-coupon for around GBP 8 million or USD 10.5 million before fees and expenses. The 90 per cent of the facility is available for drawdown in the form of cash. The first tranche of GBP 2.43 million is immediately available and is unconditional.

Financial Highlights – H1 Financial Year 2019 (30^th June 2019, USD)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2019,the company’s remained on the development phase, hence, does not generate any revenues. The company reported an operating loss of USD 1,486,238 in the first half of the financial year 2019 as compared to an operating loss of USD 594,828 in the first half of the fiscal year 2018. The LAT (Loss after tax) stood at USD 1,485,913 in the first half of the financial year 2019 versus a LAT (Loss after tax)of USD 89,520in the first half of the financial year 2018. The basic and diluted loss per share for the first half of the financial year 2019 was 0.09 cents versus a basic and diluted loss per share of 0.0001 cents in H1 FY2018.

Share Price Performance

Daily Chart as of February 24^th, 2020, before the market close (Source: Thomson Reuters)

Bahamas Petroleum Company Plc shares were trading at GBX 5.295 at the time of writing before the market close (at 12:32 PM GMT) on 24^th February 2020 and up by 13.87% versus the previous day closing price. Stock's 52 weeks High is GBX 5.70 and Low is GBX 1.20.

Key Risks
The market conditions in which the company operates is full of challenges and might impact the operation performance and reduce financial performance as well. Any change in regulations and government policies could affect the overall business of the company.Risks related to environment and climate change could hamper the operations of the company. Liquidity and interest rate risks which could affect the operations of the company.

Conclusion
Since the company is in the development phase, it doesn’t generate any revenues, and all the operations are financed through its cash reserves and grants. The profitability margins remained in the negative zone for the current period.  
The company, through the development of organic opportunities, is focussing on its operations. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The Government of The Bahamas extended the company's licences to 31 December 2020 for the second exploration period.

Based on the above rationale, we have given an “Avoid” recommendation at the current price of GBX 5.70 (as on 24^th February 2020, before the market close at 1:20 PM GMT).
 
*All forecasted data and peer information have been taken from Thomson Reuters.

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