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Summary
- Investec had third party funds under management of £51.4 billion as on 31 August 2020.
- It had Customer deposits of £32.3 billion and Core loans of £24.5 billion.
- John Laing Group signed a deal to sell its 30 percent stake in InterCity Express Programme Phase 2 to AIP Management.
- The value of the transaction is close to £421 million, which would be completed in two stages.
Investec PLC (LON:INVP) and John Laing Group PLC (LON:JLG) are two FTSE listed financial stocks. Based on the 1-year performance, shares of INVP and JLG were down by around 64.1 percent and 16.2 percent, respectively.
Investec Plc - Liquidity and capital ratios remained robust
Investec PLC is a UK based financial company that has provides services such as wealth management & investments and specialist banking. The Company operates in the UK and South African markets. Investec completed the demerger of Ninety One in March 2020, which is a separately listed entity. Investec PLC is listed on the London and Johannesburg Stock Exchanges.
Pre-Closing trading update (as on 18 September 2020)
The Company announced the scheduled pre-close trading statement for the six months ending 30 September 2020 (H1 FY21). The result of H1 FY21 will be declared on 19 November 2020. The first half of the year witnessed lower average interest rates, with a decrease in client activity and a 22 percent depreciation of the average Rand against Pound Sterling.
Over the five months to 31 August 2020, the third-party FUM (funds under management) surged by 14.1 percent against the previous period (31 March 2020: £45.0 billion). However, the core loans and advances decreased by 1.3 percent to £24.6 billion (31 March 2020: £24.9 billion).
The Company has shown a robust capital and leverage ratios, with the Group's cash and near-cash of £12.9 billion at 31 August 2020. Looking forward, NAV (net asset value) per share expected to surge in the range of 422-428 pence at 30 September 2020 (against the 414.3 pence in FY20). Moreover, the tangible NAV per share expected to increase from 377.6 pence (FY20) to between 387 pence and 394 pence. The Company seems to be well-positioned to support the clients through a challenging economic backdrop.
Share Price Performance Analysis
1-Year Chart as on September-18-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Investec PLC's shares were trading at GBX 135.00 and were down by close to 2.42 percent against the previous closing price (as on 18 September 2020, before the market close at 12:15 PM GMT+1). INVP's 52-week High and Low were GBX 385.68 and GBX 122.55, respectively. Investec had a market capitalization of around £1.42 billion.
Business Outlook
The Company highlighted that its revenue was negatively impacted due to the market volatility and contraction in the GDP; however, it is confident over the resilience of its business model. The capital and liquidity ratios are expected to remain stable in future. The provision for expected credit impairment (ECL) would increase, but it would remain below that in H2 FY20 as it included covid-19 overlays. The operating costs are expected to stay low, and the net asset value per share is anticipated to improve. The Company would focus on serving the customer and increasing its market share.
John Laing Group Plc – Sells stake in IEP East for £421 million
John Laing Group PLC is a UK based financial company that invests in infrastructure and renewable projects. The Group has made investments in projects in the UK, US, Australia, NewZealand, Germany and Colombia. John Laing has invested in more than 140 projects and classifies the investments under primary and secondary investments. The primary portfolio includes projects that are not currently operational and secondary portfolio has projects that generate cash flows. John Laing is listed on the FTSE-250 index.
John Laing Group's investment in the Global Market
(Source: Group website)
Update on Divestment
On 18 September 2020, the Company stated that it has entered into an agreement to sell the 30 percent interest in the IEP East (InterCity Express Programme Phase 2), which is for a total cash consideration of approximately £421 million (before disposal costs). This agreement also represents a robust uplift on the Company's valuation of £333 million as at 30 June 2020. The transaction will complete in two stages of roughly equal value over the next twelve months. Moreover, the dividend policy is to pay around 5-10 percent of gross proceeds, which is from the sale of investments on an annual basis.
H1 FY20 results (ended 30 June 2020) as reported on 20 August 2020
On 30 June 2020, the Company reported a NAV of 309 pence per share, which showed a decline of 6 percent in the period before dividends paid. Despite the COVID-19 pandemic, PPP portfolio delivered a solid performance, with an increase of 3% in NAV. The Company has shown a robust balance sheet and liquidity position, with £311 million of financial resources available at 30 June 2020. It declared an interim dividend per share of 1.88 pence, representing an increase of 2.2% year-on-year. Moreover, the Company seems to be well-positioned to access new investment opportunities in a growing infrastructure market.
(Source: Company Website)
Share Price Performance Analysis
1-Year Chart as on September-18-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
John Laing Group PLC's shares were trading at GBX 302 and were up by close to 6.04 percent against the previous closing price (as on 18 September 2020, before the market close at 12:20 PM GMT+1). JLG's 52-week High and Low were GBX 397.42 and GBX 271.40, respectively. John Laing Group had a market capitalization of around £1.40 billion.
Business Outlook
The Group has set the divestment plan for all its assets in the secondary investment portfolio and constantly reviews the cash flow projection of these projects. Given the current low-interest scenario and steady investor demand, the Group wants to monetize the situation through the sale of assets. The Company is hopeful that its secondary assets portfolio is poised to realize price at or above the book value. Following the impact of the covid-19, it believes that it would not achieve the sales target of £1 billion by the end of 2021, but it would accomplish that over the next few years.
