Severn Trent Plc

Severn Trent Plc (SVT) is amongst the 10 largest water and sewerage regulated companies in England and Wales. The company is focused on providing high-quality services to over 4.3 million customers both for business and households. Severn Trent Plc was incorporated in the year 1989 and was headquartered at Coventry, the United Kingdom. The company acquired Capital Controls Company in 1990 and started building its products and services business in the US as well.

Financial Highlights – H1 FY 2019 (£, million)

  
(Source: Semi-Annual Report, Company Website)

For First Half for the Financial year 2019 ending September 30^th, 2018, the company’s reported Turnover was £881.5 million as compared to £851 million for H1 FY2018. There was an increase of 3.58 per cent due to an increase in revenue from Regulated Water and Waste Water and Business Services segment for the current period. Profit before interest and tax surged by 1.39 per cent to £299.1 million as compared to H1 FY2018 data. The Profit before taxation was £203.6 million for H1 FY2019against £180.9 million for H1 2018. There was an increase of 12.55 per cent mainly because of low finance charges and net losses on financial instruments. The profit for the period (attributable to the shareholders) stood at £165.1 million for H1 FY2019 as compared to £164.1 million for H1 FY2018. The company’s Basic Earnings per share (continuing operations) was 69.8 pence for H1 FY2019 against 62.2 pence in H1 FY2018. The company’s Diluted Earnings per share (continuing operations) was 69.7 pence for H1 FY2019 against 62 pence in H1 FY2018.

Share Price Performance

Daily Chart as at May-03-19, before the market close(Source: Thomson Reuters)

On 3rd May 2019, at the time of writing (before the market close),Severn Trent Plc shares were trading at GBX 1,996.50, down by 0.17 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 2,104.00/GBX 1,757.01.

Valuation Methodology


Conclusion
The company had shown decent financial performance for the current period. There had been growth in Top-line and Bottom-line performance. As the company operates in a complex regulatory environment and had submitted its future plans for 2020 to 2025 to The Water Services Regulation Authority (OFWAT), but the company is not cleared about its outlook till Dec-19. The company supply chain will be affected by the ongoing uncertainty created by the Brexit. The company might not able to provide the best services to its consumers which in return will change their perception and will result negatively on the financial performance and reduce customer base. The company mightfail to maintain pace with the changes in legislation which will lead them to risk of non-compliance. The company’s financial performance is also affected by the fluctuations created due to exchange rate and interest rate. Based on the risks associated with the operations of the company and above valuation, we recommend investors to keep a cautious Watch approach on the stock at the closing price of GBX 2,000 (as on 2nd May 2019), while we look for any upcoming catalysts.

Centamin Plc

Centamin Plc (CEY) is the UK based mining company that specialises into exploration and development of minerals. The company is having a dual listing and is listed on exchanges of London and Toronto. The company owns Sukari Gold Mine in Egypt with a current production capacity of c. 500,000 ounces per annum. The company is operating on an advanced exploration projects in the region of Burkina Faso and Cote d'Ivoire. The company is having a workforce base of 1,497 people in its Sukari mine.

Financial Highlights – Financial Year 2018 (US$, thousand)

(Source: Annual report, Company Website)
 
For the Financial year 2018 ending December 31st, the company’s reported revenue was $603,248 thousand as compared to $675,510 thousand for the same period of last year. There was a decline of 11 per cent due to a decrease in sales of gold and silver in the current financial year. The company was able to sell 484,322 ounces of gold in the current financial year. Gross profit dipped by $64,459 thousand to $196,710 thousand in FY2018 from $261,169 thousand in FY2017. The Profit for the year before taxation was $152,702thousand for FY2018against $207,365 thousand in FY2017. The profit for the period was $152,649 thousand in FY2018 against $205,302 thousand. The company’s Basic Earnings per share was 6.497 cents for FY2018 against 8.377 cents in FY2017. The company’s Diluted Earnings per share was 6.444 cents FY2018 against 8.312 cents in FY2017.

Share Price Performance

Daily Chart as at May-3-19, before the market close (Source: Thomson Reuters)

On 3rd May 2019, at the time of writing (before the market close),Centamin Plc shares were trading at GBX 89.62, down by 0.09 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 166.90/GBX 79.14.


Valuation Methodology


Conclusion
The company showed weak financial performance in the current financial year in comparison with last year performance. Both Top-line and Bottom-line performance declined in the current financial year.Despite weak performance, the company isfocused on delivering higher organic growth through operation optimisation. The company was able to generate operating cash flow of US$223.4 million with the help of strong management guidance and strict capital allocation. The company is looking forward to re-investing in its core business to sustain for the long term and is investing heavily to explore, extract good long-term growth from its asset’s portfolio. The company showedexcellent exploration results with the production of 472,418 oz of gold to beat the cost guidance in the current financial year. The company’s Sukari mine had a significant growth potential with the production of over 11.0 Million ounces which include 7.25 Moz of reserves. Based on the strong growth prospects and the valuation done using the above method, we have given a Speculative BUY recommendation at the closing price of GBX 89.70 (as on 2nd May 2019) with single-digit upside potential based on 9.88x NTM Price/Cash Flow (approx.) on FY19E cash flow per share.

*All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.7650 GBP
*The Speculative buy recommendation is also valid for the current price as covered in the report (as on May-03-19).

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