St. James’s Place Plc (LON: STJ) offering wealth management services

St. James's Place Plc offers wealth management and investment funds management services. The group’s products and services portfolio include Investment Management Approach, Investment, Retirement, Protection, Intergenerational wealth management, Banking and mortgages, Advice for businesses, Tax year-end, Private Clients and Advice for NHS employees.

On 30th April 2020, the group will announce its first-quarter 2020 results.

Financial Highlights with Improved Liquidity (31^st December 2019, GBP, million)
For the financial year ending 31st December 2019, due to a decline in the insurance premium income, the Net insurance premium income declined to GBP 15.8 million versus GBP 16.9 million in the financial year 2018. Driven by an increase in the fee and commission income and positive investment returns for the period, the net income stood at GBP 16,563.5 million in the financial year 2019 versus a net expense of GBP 2,694.4 million in the financial year 2018. The Profit for the year stood at GBP 146.6 million in the financial year 2019 as against Profit for the year of GBP 173.5 million in the financial year 2018. The basic earnings per share stood at 27.6 pence in the financial year 2019 versus basic earnings per share of 33 pence in the financial year 2018. The financial dividend surged by 5 per cent to 31.22 pence in the financial year 2019 from 29.73 pence in the financial year 2018. The full-year dividend was 49.71 pence in the financial year 2019 versus 48.22 pence in the financial year 2018. The company’s cash balance stood at GBP 7,013.6 million as on 31st December 2019 versus a cash balance of GBP 6,877.6 million as on 31st December 2018. In the financial year 2019, the company generated an operating cash flow of GBP 435.4 million versus cash used in operational activities of GBP 30.9 million in FY2018.

Share Price Performance

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

St. James's Place Plc shares were trading at GBX 784.80 at the time of writing before the market close (at 3:35 PM GMT) on 24^th April 2020 and down by 0.15% versus the previous day closing price. Stock's 52 weeks High is GBX 1,206.00 and Low is GBX 614.00.

Valuation Methodology

*Peers: Hargreaves Lansdown Plc, Quilter Plc and Standard Life Aberdeen Plc.

Growth Catalysts
Investment in future business helps in achieving further sales growth and operational efficiencies.Acquisitions to match rapid transformation may increase integration risks and expected synergies may not be achieved.

Conclusion
From the perspective of industry, with the ageing of the population in the UK, the individuals are burdened with the retirement from the corporate and the state sectors. With the surge in the tax complexity, it is anticipated that in the longer-term period, demand for high-quality wealth management services will improve. Recently, the UK and international economies are experiencing unprecedented uncertainty stemming from COVID-19.

The company is quite confident that the depth, quality, and strength of the rising partnership will help them to stay well-positioned. Strategic collaboration, growing numbers of HNWIs and their wealth, and positive outlook towards the equity market of the UK may offer significant growth opportunities for STJ. Therefore, in the short-term period, as the existing external environment stays uncertain, faith towards investing might remain tempered.

Based on the above rationale, we have given a "Hold" recommendation at the current price of GBX 768.20 (as on 24^th April 2020, before the market close at 9:25 AM GMT).

 
Pearson Plc (LON: PSON) a multinational Media Company

Pearson Plc is operating as a multinational education and publishing company, catering the private and public institutions, the governments, and individual learners.

Trading Update with Improved Digital Growth (Q1 Financial Year 2020)
On 24^th April 2020, Pearson released an update on the trading performance in the first quarter of the FY2020. The group has revised its future expectations and reported a decline of 5 per cent in the revenue versus the previous year due to Covid-19 outbreak. The company experience disruption in its International divisions and Global Assessment due to the closure of testing centres and revenue declined by 10 per cent and 3 per cent, respectively. The closure of schools resulted in a decline in International courseware and Clinical Assessment and North American Courseware businesses. The group’s digital products and services witnessed significant growth and have made its online resources available to learners for free. The company’s revenue from Global Online Learning surged by 6 per cent for the period. The group’s 2020 product road map remained on track and continuing to make an investment in the Pearson Learning Platform. With the growth in online education, the company invest in Global Online Learning and also accelerated the shift to digital education in Higher Education in the United States. The company with GBP 0.8 billion of liquidity has a strong financial position at the end of March and secured an additional Revolving Credit Facility. The group has a net debt of GBP 1.4 billion as on 31^st March 2020 and sold Penguin Random House for GBP 530 million.The company remained committed towards its Dividend policy and proposed a final dividend of 13.5 pence payable on 7th May 2020.

Share Price Performance

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

Pearson Plc shares were trading at GBX 440.00 at the time of writing before the market close (at 3:33 PM GMT) on 24^th April 2020 and down by 2.53 per cent versus the previous day closing price. Stock's 52 weeks High is GBX 951.20 and Low is GBX 433.40.

Valuation Methodology


*Peers: Ascential Plc, Future Plc, Goco Group Plc, Informa Plc and WPP Plc.
Growth Catalysts
The group has a robust balance sheet with a strong financial position. The company continue to make an investment in the Pearson Learning Platform, which will help the company to increase its operational and financial performance in future.

Conclusion
In the first quarter of the financial year 2020, the group revised its guidance for FY2020 and witnessed a decline in the revenue with an increase in net debt. The group’s business has been diversified into multiple geographies and has a strong balance sheet and adequate liquidity. The effective measures are taken by the company to protect its financial position and reduce its costs. The group witnessed an increase in the online learning business and continue to make an investment to improve it further for future growth. The group continue to monitor the impact of COVID-19 and will take decisions to safeguard the interest of shareholders. The company’s board is confident in its long-term strategy and is confident to become a global leader in the online learning market.

Based on the decent prospects and support from the valuation as done using the above method, we have given a “BUY” recommendation at the current price of GBX 433.87 (as on 24^th April 2020, before the market close at 11:05 AM GMT) with single-digit upside potential based on 12.70x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters.

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