Three Stocks to Watch this October: IMB, RWA, and LSE

Three Stocks to Watch this October: IMB, RWA, and LSE

Imperial Brands PLC

Imperial Brands Plc (IMB), is a Bristol, the United Kingdom-headquartered FMCG (fast-moving consumer goods) company with the main business built around the tobacco portfolio. The company provides a comprehensive variety of fine cut and smokeless tobaccos, cigarettes, papers and cigars and is progressively focusing its attention on expanding and developing its NGP (Next Generation Products) portfolio.

Recent News

On 3rd October 2019, the company announced that Alison Cooper, as a Chief Executive Officer (CEO), will step down once a suitable candidate is found and the successor planning has begun. During the tenure of Alison Copper, the business has been substantially simplified and reshaped to reinforce its long-term growth potential, and over 10 billion pounds in dividends have been paid to stockholders.

Trading Statement (as on 26th September 2019)

As per the update, the company anticipates its net revenue to surge by 2 per cent for the financial year 2019. The company anticipates its NGP business to show decent progress of approximately 50 per cent in net revenue. The company anticipates revenue to grow by a lower single-digit with high operating profit in the Tobacco Business. The company’s profits will be higher by 2 per cent driven by the translation of foreign exchange. The group made good progress in the cost optimisation programme for the period. On 25th September 2019, the company accomplished the transaction with Auxly Cannabis Group Inc. As previously said by the company that they have invested C$123 million by way of a debenture, convertible into 19.9 per cent ownership of Auxly. The company’s underlying cash conversion as per the guidance given by it earlier.

Outlook

The company is making decent progress with the ongoing cost optimisation programme, which will realise annual savings of 300 million pounds by September 2020. Given the evolving environment, the company is also evaluating the effectiveness of the NGP supply chain, which may result in contract end costs that have not been included in the revised estimates. The divestment of the premium cigar business is well-positioned and has created robust interest from several potential buyers. Before May 2020, the company stay on the path to realise proceeds increase to £2 billion from the disposal programme.

The company is on track to report further deleverage in the full year. It has established its NGP (New Generation Products) “blue” as a leading brand in growing retail channel in Italy, Britain, Germany, France, Ireland, Japan and Spain. But the group is facing significant pressure in the mature European markets and the USA. Moreover, regulatory bodies are increasingly tightening regulations for NGP as well.

Share Price Performance

Share Price Performance

Daily Chart as at 14-October-19, before the market close (Source: Thomson Reuters)

On 14 October 2019, while writing (before the market close) at 9:20 am GMT, Imperial Brands PLC shares were up by 1.20 per cent, trading at GBX 1,874.4, as compared to the previous day closing price. Stock’s 52 weeks High and Low is GBX 2,789/GBX 1,736.20. The company’s stock beta was 0.99, reflecting almost the same volatility as compared to the benchmark index. The outstanding market capitalisation was around £17.63 billion, with a dividend yield of 11.98 per cent.

Robert Walters PLC

Robert Walters PLC (RWA) is a world-leading specialist professional recruitment group and an international leader in recruitment process outsourcing, which operates in a diverse range of markets worldwide across ten core disciplines. The company operates three brands, namely Robert Walters, Walters People and Resource Solutions. The company helps recruit professionals for permanent, contract and interim roles, as well as temporary and junior permanent roles organisations ranging from large corporates through SMEs and start-ups. The operations are differentiated in four geographical segments: Asia Pacific, UK, Europe and Other International.

On 9th January 2020, the company will announce the results for the fourth quarter (ending 31st December 2019).

Trading update for the third quarter ended 30 September 2019 (as on 8th October 2019)

In the trading update for the third quarter ended 30 September 2019, the company reported that the net fee income was up by 2% (4% actual) year-on-year. The group continued investment in growing international footprint and now gross profit is up 12% (18% actual) as compared with the corresponding period of the last year. Helped by a good performance by the emerging markets and a record performance in Japan, Asia Pacific net fee income was up by 3% (9% actual) over the year. Encouraging bounce-back in France and good growth across France, Germany, Netherlands and Portugal helped the group to declare a 9% (10% actual) rise in Europe net fee income. However, as a result of UK political turmoil, which resulted in weaker client and candidate confidence, UK net fee income was by down 11% (11% actual). On 30th September 2019, the net cash of the company was at a higher level at £81.6 million, from the corresponding same period of the last year.

Outlook

The ongoing indecision surrounding the US-China trade tariff stalemate, Hong Kong protests, effects of the gilets-jaunes protests coupled with and Brexit have combined to produce a typical set of combined headwinds. As per the result of these macro uncertainties, the company now expects to provide annual profits in line with the previous year.

Share Price Performance

Share Price Performance

Daily Chart as at 14-October-19, before the market close (Source: Thomson Reuters)

On 14 October 2019, at the time of writing (before the market close) at 9:21 am GMT, Robert Walters Plc shares were up by 0.22 per cent, trading at GBX 452, as compared to the previous day closing price. Stock’s 52 weeks High and Low is GBX 678/GBX 428.20. The company’s stock beta was 0.55, reflecting the lower volatility as compared to the benchmark index. The outstanding market capitalisation was around £342.99 million, with a dividend yield of 3.37 per cent.

London Stock Exchange Group PLC

London, United Kingdom-based London Stock Exchange Group Plc (LSE) is involved in global markets infrastructure business, operating a broad range of ETF, derivatives, equity, and bond markets. The company is also an international leader in financial indexing, analytic services, and benchmarking and provides market participants unrivalled access to capital markets in Europe.

On 18th October 2019, the company will announce the third-quarter trading statement. In that, they will only discuss the revenue.

Recent News

On 8th October 2019, the group’s board noted that the announcement produced by HKEX (Hong Kong Exchanges and Clearing Limited) that it does not intend to go for an offer for the company. The company continues to make decent growth on its planned acquisition of Refinitiv, with regulatory consent processes are ongoing, and investor consent for the transaction anticipated to be sought after an Extraordinary General Meeting on November 2019. The transaction stays on track to close in the second half of 2020.

In the exchange filing made by the group as on September 13, 2019, the company reported that it declined the take-over offer proposed by Hong Kong Exchange and Clearing Limited (HKEX) to acquire the total share capital of the London Stock Exchange Group.

Financial Highlights (six months ended 30 June 2019)

As on August 01, 2019, the group reported its interim results for the six months ended on June 30, 2019. Despite challenging market conditions, the group’s revenue recorded a growth of 7% on a YoY basis and stood at £1,018m and total income increased by 8% to £1,140m against the same period of the corresponding previous financial year. During the period under consideration, FTSE Russell revenue expanded to £315m from £290m reported in H1FY18 and recorded a growth of 9% on a YoY basis, driven by expansion in subscription and asset-based revenues. Also, post-trade LCH revenue ramped up by 12% to £266m from £237m a year-ago period, led by strong OTC volume in SwapClear Service. Adjusted operating profit of the group expanded by 11% to £533m from £480m, however on a reported basis, operating profit was up by 2% to £399m and pre-tax profit was up just 1% to £363m only. Group’s adjusted earnings per share soared by 13% to 100.6p/share from 88.7p/share reported in the year-over period. However, basic earnings per share narrowed marginally by 1% to 70.7p/share from 71.1p/share recorded a year-over period. The board of the London Stock Exchange declared an interim dividend of 20.1p/share, which was 17% above the dividend declared in the H1 FY18.

Outlook

During the H1 FY19, the group’s performance was moderate; also the group’s Capital Markets operations faced continuing risk from competitors’ commercial and technological offerings. There is strong competition for primary listings and capital raising from other global exchanges and regional centres with the increasing take-up of new funding models such as private equity and direct investment. London Stock Exchange Group’s Information Services business witnesses competition from a range of entities, such as from index providers which offer indices and other benchmarking tools which compete with those offered by the Group, as well as for analytics providers. However, the company stays well-positioned in an evolving regulatory and macro-economic environment and anticipate making additional progress in the second half of 2019.

Share Price Performance

Share Price Performance

Daily Chart as at 14-October-19, before the market close (Source: Thomson Reuters)

On 14 October 2019, at the time of writing (before the market close) at 9:21 am GMT, London Stock Exchange Group PLC shares were down by 0.25 per cent trading at GBX 7,230, as compared to the previous day closing price. Stock’s 52 weeks High and Low is GBX 7,922/GBX 3,842. The company’s stock beta was 0.71, reflecting the lower volatility as compared to the benchmark index. The outstanding market capitalisation was around £25.38 billion, with a dividend yield of 0.87 per cent.