Bank of Georgia Group PLC

Bank of Georgia Group PLC (BGEO) is a leading universal Georgian bank, which is headquartered in London and operates retail banking & payment services, wealth management operations and corporate investment banking in Georgia and BNB (banking operations in Belarus).

Financial Highlights (9M FY19, GEL thousands)
As net interest margin over the year declined to 5.4%from 6.8% in the prior year, net interest income increased to GEL 553 million from GEL 552 million in 9M FY18. However, operating income of GEL 801 million rose by 5.8% from GEL 757 million in 9M 2018. Driven by a strong increase in the fees and commission income from guarantees and letters of credit and strong performance in the settlement operations, net fee and commission income reached GEL 48 million in 3Q19 and GEL 133 million in 9M FY19. Total profit rose by 30.2% to GEL 343 million in the current period and GEL 134 million in the third quarter, representing a growth of 20.9%.

Share Price Performance

Daily Chart as at November-08-19, before the market closed (Source: Thomson Reuters)

On 8^th November 2019, Bank of Georgia Group PLC shares were trading at GBX 1,463 at the time of writing before the market close (at 11:17 AM GMT), down by 0.611% against the previous day closing price. Stock's 52 weeks High and Low are GBX 1,777/GBX 1,220. The company's stock beta was 0.76, reflecting the lower volatility as compared to the benchmark index.

Conclusion
During the period, loan book growth reached 29.4% year on year and 7.2% quarter on quarter at 30 September 2019, and the Basel III Common Equity Tier 1 (CET1), Tier 1 and Total Capital Adequacy ratios stood at 11.1%, 13.3% and 16.8% respectively, indicating a strong capital position. The company has actively continued the further development of its digital strategy, and the Georgian economy has continued to perform well, with a growth of 5.7% in the third quarter of 2019.

The company’s cost of credit risk ratio has decreased against the Q3 FY2019’sratio, reflecting strong conditions on consumer lending. The increase or decrease in credit risk is also dependent on seasonal factors. In September 2019, the company has delivered a robust balance sheet and income from fee increased.

There had been a significant growth in the financial performance in the Q3 2019and for the first nine months of 2019. The company had delivered growth in top-line and bottom-line performance for the third quarter and first nine months of 2019. The company is seeking to gain benefit from the growth in the Georgian economy via its Retail Banking and Corporate Investment Banking divisions. The company is looking forward to delivering on its strategy based on at least 20% Return on Average Equity (ROAE) and 15% growth of its loan book. The group is looking forward to becoming a prominent organisation in Georgia not only in terms of financial performance but also as an innovative group with regional wealth management and digital leadership.

Based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 1,463 (as on 8^th November 2019, before the market close).
 

Purplebricks Group PLC

Purplebricks Group Plc (PURP), formerly known as New Broom Limited, is a real estate agency. The group provides a technology platform that facilitates the process of selling, buying and letting a property. It has operations in Australia, the UK, the US and Canada. Purplebricks is headquartered in Solihull, the UK.

Trading Update (as on 7^th November 2019)
The company announced a trading statement for the six months ended 31st October 2019. During the current period, there was a weakening in the overall United Kingdom property market as economic and political uncertainty impacted confidence, decreasing home sale volumes. This was mainly notable in the South East. Against this backdrop, the company retained its 4 per cent overall market share and also anticipates reporting an increase in the marketing-to-revenue ratio as planned efficiencies are now being realised. At a Group level, the pro forma revenue is projected to be approximately flat relative to the corresponding period of the last year and the substantial losses incurred in the previous period has now been reversed. The company enjoyed a profitable trading in the first half of the financial year 2019. On 12^th December 2019, the company will announce the interim results.

Financial Highlights (for the year ended 30 April 2019, £million)

(Source: Annual Report, Company Website)

In the financial year ending 30th April 2019, the company’s reported revenue increased by 55 per cent to £136.5 millionas compared with the financial year 2018 of £87.8 million. UK revenue climbed by 21 per cent to £90.1 million. UK ancillary revenue contributed 44 per cent of total revenue against the 43 per cent recorded in FY18.  With the significant increase in the financial expenses for the period, the company reported an LBT (loss before tax) of £55.9 million in FY2019 versus an LBT (loss before tax) of £29.2 million in FY2018. The company’s basic and diluted loss per share was at 18 pence in FY2019 as against a basic and diluted loss per share of 11 pence in FY2018.

Share Price Performance

Daily Chart as at November-08-19, before the market closed (Source: Thomson Reuters)

On 8^th November 2019, Purplebricks Group PLC shares were trading at GBX 112 at the time of writing before the market close (at 12:10 PM GMT), down by 0.885% against the previous day closing price. Stock's 52 weeks High and Low are GBX 195/GBX 88.50. The company's stock beta was 2.51, reflecting the higher volatility as compared to the benchmark index.

Valuation Methodology
 

Conclusion
Although the company’s revenue has increased for the period, the company’s profitability remained in the negative zone. The company had not been able to control its operating and non-operating expenses effectively, which has resulted into decline in the bottom-line performance for the financial year 2019. The company’s cash balances have reduced significantly for the period.

The company believe that the technology-led proposal will give enough progress and will enable them to take market share from the agents. In FY2019, with decent growth in the balance sheet, the company will invest in the technology, product, and brand development initiatives, while ensuring greater control across generation and cash management. The company’s operations are also impacted by the uncertainty created due to the ongoing Brexit as it impacts the company’s supply chain and downward trends in the volumes. Other factors, such as global economic uncertainties and foreign exchange risk, are negatively impacting the company’s operational and financial performance.
Based on the above factors and supported by valuation done using the above method, we have given a “Watch” recommendation at the closing price of GBX 113 (as on 7th November 2019) with support from few catalysts needs to be evaluated at a later stage.
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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