NCC Group Plc

NCC Group Plc (LON: NCC) is a cybersecurity and risk mitigation company. In the ever-evolving threat landscape, the company works with businesses to safeguard their brand and customer information by helping businesses to identify, assess, mitigate & respond to the risks they face.

The group will release its interim results on 28^th April 2020.

COVID-19 Trading update
On 23^rd March 2020, NCC Group released an update related to rapidly changing social and economic environment. Due to the cumulative impact of coronavirus, there has been cancellations and delays in work in multiple areas have led to a decline in revenues, primarily from Cyber Assurance business. The company’s operations were profitable through the March, but due to deferred and cancelled projects, the group has withdrawn current guidance until global operations resume normally. The group will provide a further update after the closing of the year ending 31^st May 2020. The group’s primary focus is to ensure the safety of its employees and customers and started remote-working initiatives in multiple offices globally. NCC Group has multiple features which will help then to face Covid-19 challenge, despite the uncertainty of customer demand. The group’s balance sheet remained strong with revolving credit facility of GBP 100 million as on 29^th February 2020. The cash balance stood at GBP 32.5 million in February 2020.

Share Price Performance

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

NCC Group Plc shares were trading at GBX 136.60 at the time of writing before the market close (at 1:01 PM GMT) on 24^th March 2020 and down by 1.87% versus the previous day closing price. Stock's 52 weeks High is GBX 236.00 and Low is GBX 125.40.

Valuation Methodology


Conclusion
Presently, the company is at the mid-point of the 3-year transformational programme. In the current period, the company’s performance was well-positioned, and the company will enter the second half of 2020 with a robust order book and positive momentum across the businesses. The strategic importance and value of cybersecurity in the target markets continue to increase due to regulatory pressure and high-profile breaches. The company was successful in reducing its seasonal net debt to GBP 20 million, reflecting a strong financial position. The operations are impacted by the outbreak of COVID-19 as it resulted in deferred and cancelled projects.NCC group has multiple features which will help then to face Covid-19 challenge, despite the uncertainty of customer demand.

Based on the above rationale and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 122.35 (as on 24^th March 2020, before the market close at 8:29 AM GMT) with lower double-digit upside potential based on 18.00x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 

Spire Healthcare Group Plc

Spire Healthcare Group Plc (LON: SPI) is an independent hospital company. The company specialises in Bones and Joints, Cosmetic surgery, Eye surgery and treatments, Heart treatments, Men’s Health, Urology, Weight loss and Women’s Health.

The group will release its interim results on 21^st August 2020.

Recent News
On 23^rd March 2020, Spire Healthcare Group announced the confirmation of signing Heads of Terms with NHS England. As per the agreement, the group will provide its facilities and services during the COVID-19 outbreak to the NHS and its patients.

Financial Highlights – Financial Year 2019 (31^st December 2019, GBP, million)
For the financial year 2019, the company’s revenue increased by 5.3% to £980.8 million as compared with the previous year (2018: £931.1 million). This increase was driven by private growth of 5.8% in 2019 (2018: 3.4%). PMI revenues increased by 7%, Self-pay surged by 2.7%, and NHS rose by 5.0%. The operating profit, post-IFRS 16, increased by 32.8% to £94.4 million against the previous year (2018: £71.1 million). The adjusted earnings per share stood at 2.4 pence in FY19. The company has delivered net bank debt lowered, with covenant leverage at 3.0x EBITDA versus limit of 4.0x. The Board has proposed a final dividend per share of 2.5 pence which represents a total dividend per share of 3.8 pence.

Share Price Performance

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

Spire Healthcare Group Plc shares were trading at GBX 80.50 at the time of writing before the market close (at 1:09 PM GMT) on 24^th March 2020 and up by 20.96% versus the previous day closing price. Stock's 52 weeks High is GBX 145.00 and Low is GBX 51.10.

Valuation Methodology


Conclusion
The financial year 2020 is progressing in-line with the Board’s anticipations, while coronavirus (COVID-19) is creating uncertainty. The nature and scale of any potential impact are dependent on the course of the disease, which cannot be predicted accurately at this time. The company is actively managing the situation on a daily basis and following Public Health England guidelines. For the full year 2019, the company made decent progress, particularly in private revenues, driven by strong sales growth momentum. The group sawgrowth in both self-pay and private insurance, with a mainly robust result in private insurance, reflecting increasing customer awareness, following the marketing campaigns. The company is delighted that both the new hospitals in Nottingham and Manchester have been rated as an outstanding and have the highest number of outstanding sites of any independent provider.

Based on the above rationale and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 66.55 (as on 23^rd March 2020) with double-digit upside potential based on 12.50x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.
 *The “Speculative Buy” recommendation is also valid for the current price as covered in the report (as on 24^th March 2020).

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