NMC Health PLC

Abu Dhabi-based NMC Health PLC (NMC) is a diversified health care group, which operates in the United Arab Emirates (UAE). The company is involved in business sectors ranging from trading, information technology, and health care. The company is top ranked amongst the largest fertility service providers in the world and the largest private healthcare group in the UAE. Currently, it is a constituent of the FTSE 100 index and was the first company from Abu Dhabi to list on the London Stock Exchange.

On 4^th March 2020, the company will announce the FY 2019 earnings.

Recent News
On 27^th September 2019, the company announced that Prasanth Manghat (CEO and Executive Director), exercised several nil-cost share options of more than 133,728 shares, awarded to him in 2016, 2017 & 2018 under the group's LTIP (Long Term Investment Plans) and DSBP (Deferred Share Bonus Plans).

Financial Highlights (for the six months ended 30^th June 2019, US$ million)

(Source: Interim Reports, Company Website)

In the first half of 2019, the top-line performance of the group was in line with the anticipations of the management, with revenue surged by 32.6 per cent to $1,236 million as compared with the same period in 2018. On the pre-IFRS 16 basis, the EBITDA margin stood at 22.4 per cent, a decrease of 180 basis points as compared with the corresponding period of the last year. The net income to equity holders stood at $151.0 million (pre-IFRS16) and $138.1 million (post-IFRS 16) in H1 FY19. The net debt/EBITDA remained flat at 3.4x. For the H1 FY19 period, Free Cash Flow stood at $77.8 million.

Share Price Performance

Daily Chart as at October-04-19, before the market closed (Source: Thomson Reuters)

On 4th October 2019, NMC Health PLC shares were trading at GBX 2,524 at the time of writing before the market close (at 9:30 AM GMT), down by 0.55% against the previous day closing price. Stock's 52 weeks High and Low are GBX 3,764/GBX 1,773.50. The company’s stock beta was 0.84, reflecting the lower movement of the stock as compared to the benchmark index.

Conclusion
The company plans to continue successful execution and provide robust growth year after year. The group delivered a robust financial and operational performance. The group has persisted to improve its vertical outline to cater to the regional market, which is characterised with a positive outlook for high-quality healthcare access. The healthcare market stays extremely conventional, and the group is focused on effective utilisation of current assets. For the financial year 2019, the company expect revenue in the range of $2,500-$2,540 million, while on Post IFRS 16 basis, EBITDA will be in the range of $665-$675 million (Pre-IFRS 16: $575-$585 million). Post IFRS 16, guidance for net income to equity holders for the year 2019 was $297-$305 million (Pre-IFRS 16: $320-$330 million), while guidance for lease liability was $680-$690 million.  The company, via both inorganic and organic means, can detect fresh prospective markets.

Based on the above rationale, we have given a “HOLD" recommendation at the current price of GBX 2,524 (as on 4^th October 2019, before the market close).
 

Stagecoach Group PLC

Stagecoach Group PLC (SGC) is a public transport company, headquartered in the UK with operational presence in England, Scotland and Wales. Its areas of operation are divided into two segments: UK Bus and Rail. Its shares are listed on the main market of the London Stock Exchange and a constituent of the FTSE 250 and FTSE 350 indices. The outstanding capitalisation of the company stood at £733.42 million, which ranks it among the small-cap companies listed on the LSE.

On 11^th December 2019, the company will announce the interim results for the six months ended 26^th October 2019.

Trading Statement (as on 3^rd October 2019)
The company delivered a trading update regarding its financial year ending 2nd May 2020. The projection of the company's adjusted earnings per share for the financial year 2020 is unchanged from the previous announcement.

The financial performance of the bus operations has been broadly in line with the company’s expectations. During the period, the company delivered a robust performance in the United Kingdom Bus Division, where positive service performance has reported better than expected Quality Incentive Contract income. On existing year tenders, the company is inspired with the performance for Transport for London contracts. The company also believes that the bidding plan will help the long-term sustainability of the enterprise. For the twenty weeks ended 14th September 2019, the like-for-like (LfL) revenue increased by 1 per cent in UK Bus division and this was lower than the expected growth. Over the longer term, the company stay focused on initiatives to increase revenue. The company is exploring prospective new income streams, involving festivals, events around the UK, and partnerships with airports.

On 25 April 2019, the company declared a share buyback programme to buy back shares with an average market value of not more than 60 million pounds.  On 2nd October 2019, the group bought back 21,830,035 ordinary shares at a total consideration of around £28.5 million.

Share Price Performance

Daily Chart as at October-04-19, before the market closed (Source: Thomson Reuters)

On 4th October 2019, Stagecoach Group PLC shares were trading at GBX 132.40 at the time of writing before the market close (at 9:45 AM GMT), down by 0.451% against the previous day closing price. Stock's 52 weeks High and Low are GBX 184.70/GBX 113.60. The company’s stock beta was 0.82, reflecting the lower movement of the stock as compared to the benchmark index.

Valuation Methodology


Conclusion
The group was adversely impacted by being disqualified for three new rail franchise by Department for Transport. Also, the intensely competitive environment in franchised London Bus market would be challenging for the company. At the end of FY19, a Debt-to-Equity ratio of the group stood at 3.37x whereas industry median was at 1.16x, which indicates that the group is highly leveraged against its peers.
Therefore, based on the above factors and valuation done using the above methodology, we have given a “Watch” recommendation at the current market price of GBX 132.40 (as on October 04, 2019, before the market close), based on the 8.38x NTM Peers Average P/E (approx.) on the FY20E earnings Per Share (approx.), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures have been taken from Thomson Reuters.

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