Relx PLC

RELX Plc (REL) is a London based world’s leading global information services company. The company provides information-based analytics and decision tools to customers using innovative solutions which merge content and data with analytics and technology.

On 23^rd April 2020, the company will release its trading update.

Recent News
On 13^th February 2020, the company announced in compliance with the European Market Abuse Regulation that it would execute an irrevocable, non-discretionary programme to repurchase its ordinary shares up to the value of 50 million pounds in total between 13th February 2020 and 22nd April 2020. This follows the fruitful completion of a non-discretionary programme of 100 million pounds on 10th February 2020. Both programmes are part of the 400 million pounds to be deployed on share buybacks in the year 2020.

Financial Highlights (for the year to 31^st December 2019, £million)

(Source: 2019 Results, Company Fillings, LSE)

For the financial year 2019, the company’s revenue increased by 5% to £7,874 millionas compared with the previous year (FY18: £7,492 million), while underlying growth stood at 4%. The increase in underlying revenue was driven by good growth in electronic and face-to-face revenues, and the additional development of the decision and analytics tools, partly offset by a continued decrease in print revenue. The adjusted operating profit for the financial year 2019 increased by 6% to £2,491 millionagainst the last year (FY18: £2,346 million). Underlying operating profit increased by 5% in FY19. The growth in adjusted and underlying operating profit was driven by continued operating process innovation and revenue growth. The operating profit was reported at £2,101 million in FY19, an increase of 7% from the previous year. In the financial year 2019, the adjusted earnings per share (EPS) increased by 10% to 93 pence, while on a constant currency basis, it increased by 7%. The Board is proposing a full-year dividend per share of 45.7 pence. In FY19, the ROIC (return on invested capital) stood at 13.6%. In 2019, the company deployed 600 million pounds on share buybacks.  

Share Price Performance

Daily Chart as at February-14-20, before the market closed (Source: Thomson Reuters)

Relx PLC shares were trading at GBX 2,039 the time of writing before the market close (at 8:20 AM GMT) on 14^th February 2020 and were down by 1.59% versus the previous day closing price. Stock 52 weeks High and Low are GBX 2,100.00/GBX 1,597.00. The group’s stock is reflecting the lower volatility as against the benchmark index based on the company’s beta of 0.59. On a week to date basis, the stock price has given negative 2.35 per cent returns (approx.).

Valuation Methodology


Conclusion
In 2020, the company expect to deploy 400 million pounds on share buybacks, of which 100 million pounds has already been accomplished.In the early part of 2020, the company’s key business trends are consistent with recent years. The company expect to deliver another year of decent underlying growth in adjusted operating profit and revenue. In the current financial year, the company will also deliver a decent increase in adjusted earnings per share on a constant currency basis.

The demand of the company's products and services may be adversely affected by macro-economic and political events, a risk which has intensified in the past few months.Moreover, RELX operates in a highly dynamic market with excessive competition, and demand continues to change due to rapid innovations in technology. Failure to adapt to these changes can have a material impact on the company's performance.

Currently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level.

Based on above valuation and risk parameters, we recommend investors to keep a "Watch" on the stock at the closing price of GBX 2,072 (as on 13^th February 2020), with support from few catalysts needs to be evaluated at a later stage.

Melrose Industries PLC

Melrose Industries Plc (LON: MRO) is an investment company that specialises in buying strong fundamental manufacturing business which can be further improve in terms of performance. The company provides products such as air management, security, home automation, ergonomic and electricity generating equipment.

On 5^th March 2020, the company will announce its full-year results.

Recent News
On 21^st January 2020,the company release thatDelta Electronics Incorporation and GKN Automotive collaborate to hasten the development of Nextgeneration eDrive technology. It will enable quick acceleration from 80kW to 155kW.

Trading Update (as on 19^th November 2019)
The company released an update for the four months ending 31st October 2019. The company is trading in line with the board's anticipations for the year 2019. The company’s net debt was in line with the company's anticipations with substantial investment and restructuring actions being funded.

In the current period, Aerospace sales growth surged by more than 5 per centas compared with the corresponding period of the last year. The aerospace division also delivered a good margin in the current period from the same period last year. During the current period, Automotive sales decreased by 5 per cent year-on-year, due to the temporary impact of the General Motors strike in the United States, while Automotive division delivered a higher profit and margin in the current period.  In Powder Metallurgy division, the sales reduced by 13 per cent in the current period against the same period last year. In the current period, Powder Metallurgy contracts were traded to acquire Forecast 3D, which had 2018 sales of $19 million.

Share Price Performance

Daily Chart as at February-14-20, before the market closed (Source: Thomson Reuters)

Melrose Industries PLC shares were trading at GBX 239 at the time of writing before the market close (at 8:15 AM GMT) on 14^th February 2020 and remained the same against the previous day closing price. Stock 52 weeks High and Low are GBX 255.24/GBX 156.35. The group’s stock is reflecting the higher volatility as against the benchmark index, based on the company’s beta of 1.63. In the last three months, the stock price has given positive 7.32 per cent returns (approx.).

Conclusion
The company specialises in buying underperforming manufacturing groups with the aim of improving profit margins.The company’s business was affected due to an adverse macro-economic condition, but this will not halt the company. The group is ongoing to transform the GKN businesses, providing another trading update in line with anticipations, and also attaining better trends than witnessed in H1 FY19. The company faces a risk of loss of key management which could affect the operations of the company. Any change in government policy, regulations, etc. could impact the overall business of the company. Fluctuation in foreign exchange rates could affect the profitability of the company. However, the company is well-positioned. Its current performance is as per the expectations. The business is improving, and the management looks confident for the growth of the company. Significant investments are made to improve business performance and to reduce working capital. The company is also confident in the ability to unlock significant further shareholder value.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 239 (as on 14^th February 2020, before the market close).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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