This company faces a major challenge in the coming years

The analysts at Sharesunderten give the stock the benefit of the doubt by taking a modest position. If the results disappoint, we can quickly withdraw. However, if the optimism that prevails in our team proves justified and the price rises, we will reassess our strategy. After conversion to euros, the price of the stock is €1.58, and we buy 400 shares. Don’t forget that we are currently analyzing more promising stocks for our portfolio; so make sure you leave enough financial room for the other opportunities that are coming.

The energy transition takes time, effort and money. On the British stock exchange, Centrica shares have had a 2024 stock market year to forget as quickly as possible. After a weaker period in the autumn, the price of this energy giant recovered in the last weeks of last year to just below the levels of 1 January 2024. These are therefore challenging times for an energy company like this. The suppliers of natural gas and electricity are all involved in the energy transition, in other words the transition to sustainable energy sources. The investments in green energy cost a lot of money, without any guarantee of success at the end of the day. Centrica has promised better results in the future, but will have to keep that promise. Pending improvement in the figures, we are taking a half position with this share. The chances of a significant increase in the share price in the short or medium term will only increase when the first swallow proves that summer has arrived.

Profile

The UK electricity sector has undergone major changes in recent years, with a significant reduction in electricity generation from fossil fuels such as coal and an accelerated shift to renewables. This transition period is still in full swing, leaving the energy sector in choppy waters. The UK government has set an ambitious target of fully decarbonising the energy sector by 2035. This includes deploying up to 50 gigawatts (GW) of offshore wind by 2030, 70GW of solar capacity by 2035 and up to 24GW of nuclear capacity by 2050.

Some of the journey has already been completed. The UK has more than halved the amount of electricity it generates from fossil fuels, but gas still accounts for the largest share of the country’s energy supply at 28%. A recent report found that by 2024, the UK’s electricity supply will be cleaner than ever, with wind and solar power reaching their highest ever output.

Centrica operates in this rapidly changing environment. Centrica plc operates as an integrated energy company in the UK, Ireland and a number of other countries through subsidiaries including British Gas Services & Solutions, British Gas Energy, Centrica Business Solutions, Bord Gáis Energy, Energy Marketing & Trading and others. It supplies gas and electricity to residential, commercial, industrial and small business customers, including associated services. Centrica has grown to be the only truly vertically integrated energy company in the UK, making it a central player in the energy sector’s transition to Net Zero.

Numbers

Centrica did not report quarterly results, so the latest we have are for the first half of 2024, when the company said it delivered a good financial performance in a more normalised environment. Adjusted operating profit for the period was £1.0bn, taking into account the unwinding of unrealised hedges from 2023 and a write-down or impairment of its nuclear investments. Free cash flow of £0.8bn (H1 2023: £1.4bn) also reflected dividends received from those nuclear investments.

The balance sheet remained strong, with an adjusted net cash position of £3.2bn compared with £2.7bn at the end of 2023. In line with the progressive dividend policy, the interim dividend per share was increased to 1.5p and the share buyback programme was extended by £200m. This programme is expected to be completed around February 2025. It is not yet certain whether a new programme will be announced.

Strengths

The energy transition offers long-term opportunities.
A strong balance sheet provides room for further investments.
The increase in the interim dividend underlines management’s confidence in its own abilities.

Weaknesses

A high beta indicates relatively large price fluctuations.
Limited transparency at Centrica Energy is putting pressure on the share price.
The ambitious targets for 2028 have yet to be achieved.

Conclusion

The problem with the energy sector in general and Centrica in particular is that there are still many question marks waiting to be answered. Needless to say, the energy transition is an ambitious project that requires heavy investment. Centrica’s green energy-focused growth and investment strategy means that investment needs to be increased significantly in the coming years, to an annual capital expenditure of £600m-£800m by 2028. These types of energy storage projects are crucial to decarbonising the economy and also to protecting the UK from shortages and painful fluctuations in energy prices. The extension of the share buyback programme and the increase in the interim dividend provide some room for optimism. Ultimately, the cool figures should confirm that Centrica is on the right track. The analysts at UBS have given a buy recommendation from the current £1.38 to £1.75 , which offers an upside potential of almost 27%! We give the stock the benefit of the doubt and take a half position. If the figures turn out to be mediocre, we can choose the hare path, but if the optimism is confirmed, the price will run and we can make the next decision.

Centrica in figures

Earnings per share

2023: £0,22
2024: £0,20
2025: £0,26

Course information

Current rate: £1.38
Price-earnings ratio: 6.3
Highest price in the last 12 months: £1,579
Lowest price in the last 12 months: £1,129

Dividend

Benefit: £0.04
Dividend yield: 3%

Financial results

2023 revenue: £27.75 billion
EBITDA: £2.22 billion
Market capitalisation: £7 billion

Continue reading?

This article is only available to subscribers of SharesUnderTen.com. If you are not yet a subscriber, please consider subscribing.

Join thousands of others?

Become a member now and get instant access to our entire platform.

The value we offer:

Remarkable 29% profit in 2024
Get all analyses of stocks under a tenner
Get insight into our current portfolio
Receive weekly updates on our portfolio
Ask your general questions about our portfolio

Lees ook

No posts found!

Premium

Shareunderten.com Portfolio Update, Current Outlook

We’re seeing more and more investors embrace our investment strategy: buying undervalued stocks under 10 euros with serious upside potential. The stock Rolls-Royce, on which we’ve achieved nearly 1,000% gains, is clear proof that you can turn a nickel into a dime. In this update, we provide a clear overview of the positions we currently hold in the Sharesunderten.com portfolio. For each stock, we explain: Why we originally bought the stock What developments have occurred since then – in terms of company performance or market news And why we currently see no reason to sell these positions We remain committed to our approach: selective, disciplined, and focused on medium- to long-term returns. Time is our ally. Stocks under ten euros often have the most room for recovery or revaluation – if you know where to look. If certain stocks have already risen significantly, you’re still welcome to follow our updates, and of course, invest alongside us in those positions that are still active buys for new subscribers. Let’s start with our first position… BP Deceuninck Rolls Royce Grab Holding Hello Fresh Brunel Centrica Playtech BP On May 19, 2021, we took our first position in BP when the share price stood at 310 pence. We bought 1,250 shares for the Sharesunderten portfolio, convinced of the recovery potential of this British energy giant. At the time, oil prices had begun to rise again after the pandemic-induced low in 2020, but BP’s share price had barely followed suit. Nonetheless, we saw clear signs of recovery: management announced debt reduction, a share buyback program, and a total cash return to shareholders of 8 to 11% starting in 2022—significantly more than sector peers. In addition to strong shareholder returns, BP also began taking a leading role in the energy transition. The new CEO, Bernard Looney, announced a structural reduction in oil and gas production and a transformation into an integrated energy company. BP committed to investing $5 billion annually in sustainable initiatives, including solar and wind energy, hydrogen, and biofuels. BP became the first oil major to publicly acknowledge that peak oil demand was behind us. We held the position for three years. In May and June 2024, we sold our shares in two tranches, realizing a total return of about 70% including dividends. The timing proved excellent: shortly after our sale, the share price corrected slightly. This also gave us an opportunity to re-enter at lower levels. In January 2025, we re-initiated a position at 434 pence, using 60% of the original investment volume. We had already expressed our intent to buy more on a correction and followed through in early May at 360 pence. Our renewed confidence in BP is based on two factors. First, the valuation remains attractive, with a P/E ratio just above 7 and a dividend yield of 6.4%, potentially rising to 7.4% by 2027. Second, BP is making significant progress in its transition to a low-carbon energy company, with a strong focus on hydrogen. Projects like Lingen Green Hydrogen aim to put BP at the forefront of a market estimated to grow to $259 billion by 2033. BP’s financial foundation is solid. In Q3 2024, it generated $6.8 billion in cash flow and even raised its dividend despite pressure on refining margins. With free cash flow expected to rise toward 20% in the coming years, there is room for both investments and shareholder rewards. We expect BP to rise in the short term toward 550 pence, a price target aligned with profit and cash flow growth forecasts. Over the longer term, we believe BP is well positioned in both fossil and renewable energy markets. BP combines operational strength with a clear long-term strategy, and as long as that remains the case, we want to remain invested. BP share price performance over the past five years. Deceuninck On May 31, 2021, we initiated a position in Deceuninck at €2.94. The timing proved excellent. The Belgian manufacturer of PVC window and door profiles benefited greatly from the European renovation wave, driven by sustainability subsidies and higher home investments during lockdowns. Deceuninck returned to profitability, reduced debt, and made substantial investments in product development and a recycling plant. The share price rose quickly, and when majority shareholders Willy and Arnold Deceuninck announced a private placement of their stake, we decided to exit completely on September 14, 2021, realizing a nearly 30% profit. Large placements often signal a pause in upward momentum, which proved correct. However, we re-entered the stock on August 18, 2023, at €2.27, buying 1,250 shares for our portfolio. What caught our attention: despite a 10% price drop over the past year, the share price of Ege Profil—Deceuninck’s Turkish subsidiary in which it holds an 88% stake—had more than tripled. That stake alone was worth around €340 million, while Deceuninck’s total market cap stood at €321 million. In other words, investors were attributing a negative value to all other activities of the Belgian parent company. At the same time, management reiterated its 2023 guidance: EBITDA growth and improved free cash flow. No profit warning was issued, and the results released in late August confirmed the company’s resilience in a challenging market. We continue to hold Deceuninck firmly in our portfolio. The company benefits from a strong competitive position due to its franchise-like sales model, which ensures customer loyalty, pricing power, and margin protection. The balance sheet is also healthy, with net debt of just €88.3 million on nearly €1 billion in revenue by the end of 2022. Investments in recycling and circularity align perfectly with long-term trends in the construction and renovation sectors. And last but not least: the hidden value of Ege Profil is still not fully reflected in the share price. We believe management has several strategic options to unlock this value—such as selling the Turkish stake or initiating a share buyback program. As long as this option remains open and cash flows remain intact, Deceuninck remains a buy for us. We are staying

Lees verder >

07/10/2025

Analyse

The recovery of this stock on the London Stock Exchange has been sluggish.

Let’s be honest — it does look good when you’re trading “shares under ten” and you’ve got Rolls-Royce in your portfolio. Despite the prestigious name, this stock fully qualifies as a true penny stock. Shares Under Ten is adding 2,000 shares to the portfolio at the current price of around 97 pence. 5-Year Share Price Performance – Rolls-Royce Holdings plc. Company Profile The Rolls-Royce brand is, of course, best known for its luxury cars — but many may not realise that the automotive business has long been owned by BMW. Rolls-Royce Holdings plc, founded in 1884 and headquartered in London, operates independently and focuses on engineering and power systems. The company is structured into four divisions: Civil Aerospace, Power Systems, Defence, and New Markets. The Civil Aerospace division designs, manufactures, and services engines for large commercial aircraft, regional jets, and business aviation. The Power Systems division develops and sells integrated power and propulsion solutions for marine, defence, and selected industrial sectors. The Defence division supplies engines for military transport aircraft, patrol aircraft, and naval propulsion. The New Markets division focuses on small modular reactors (SMRs) and new electric energy solutions, as well as maintenance, repair, and overhaul (MRO) services. The New Markets division is expected to play a key role in the global energy transition. Rolls-Royce is working to accelerate the launch of a new generation of mini nuclear reactors, a development fast-tracked by the ongoing energy crisis. While these SMRs aren’t expected to be operational before the early 2030s, management is eager to speed up the process, especially as Western nations seek to reduce dependence on Russian fossil fuels following the invasion of Ukraine. However, engineers within the company have expressed frustration with the slow pace of regulatory approval in the UK, arguing that the government’s process for reviewing reactor safety is unnecessarily burdensome. Rolls-Royce aims to build SMRs that generate around 470 megawatts of power — just one-seventh the output of a large-scale nuclear plant, but at roughly one-twelfth the cost. The UK government has stated that the company’s technology is entirely new and must therefore undergo thorough scrutiny. Rolls-Royce engineers, however, point out that the technology is based on decades of experience in nuclear-powered submarines, a proven and extensively tested field. Rolls-Royce cannot be acquired without government approval. The UK government holds a so-called “golden share,” which grants it special veto rights. This share does not offer profit participation or capital rights, but allows government representatives to attend general meetings and block specific strategic moves — such as takeover bids — that could affect national interests. Financials The UK’s most well-known engineering firm was hit hard by the COVID-19 pandemic, as airlines pay Rolls-Royce based on the number of flight hours logged by its engines. Given these extraordinary circumstances, FY2020 and FY2021 are not considered reliable indicators of the company’s underlying performance. In 2021, Rolls-Royce reported £414 million in underlying operating profit, a sharp turnaround from a loss the previous year. Growth in the Power Systems and Defence divisions contributed significantly to this financial improvement. However, the company also reported a free cash outflow of £1.5 billion from continuing operations in the same year. CEO Warren East commented on the results: “We have improved our financial performance, met our short-term commitments, secured new business, and made important strategic progress during the year. While challenges remain, we are increasingly confident about the future and the significant commercial opportunities presented by the energy transition.” Rolls-Royce’s credit profile has improved since the onset of the pandemic, and its exposure to the Russia-Ukraine conflict remains limited. As a result, Moody’s upgraded the company’s outlook from negative to stable. Pros Strong visibility and predictability of earnings Stable margins in the Defence division New CEO Warren East is aiming to bring fresh momentum to the company Cons Loss of market share in the business jet segment Disappointing cash flow development High R&D costs for new engine programmes Conclusion We are not particularly enthusiastic about this stock. While management certainly shows no lack of ambition, those good intentions have yet to translate into improved results. The company appears to be spread too thin across too many markets — and it’s simply not possible to be best-in-class everywhere. A more focused approach would likely serve Rolls-Royce well. Divesting non-core activities and doubling down on key strengths could strengthen both performance and investor confidence. The business jet division, for example, already faced structural challenges before the energy crisis, and its outlook remains weak. A sale of this unit might be a sensible move — especially if a solid price can still be secured. Back in August 2021, management announced it was open to selling assets such as ITP Aero, the turbine blade manufacturer, in an effort to raise at least £2 billion. Strategic asset sales like these may be necessary to unlock value and refocus the company. Third-Party Analyst Ratings for Rolls-Royce. Globally, twenty analysts currently cover Rolls-Royce Holdings, and the consensus view is that the stock could gain around 28% over the next 12 to 18 months. At Shares Under Ten, we believe the share price has likely found a bottom, and we’re taking this opportunity to add the stock to our portfolio. Naturally, we’ll be monitoring developments closely. A takeover seems highly unlikely under current circumstances. Rolls-Royce plays a vital role in the UK defence sector, and the government holds a golden share that gives it veto power over any unwanted acquisition. In addition, ceding control over Rolls-Royce’s expertise in modular nuclear reactors would run counter to the UK’s long-term energy policy. Former Prime Minister Boris Johnson has been a strong advocate for nuclear energy and clearly sees the company’s know-how as a strategic national asset — especially amid the current energy crisis.Takeover rumours have surfaced before. Rolls-Royce was the subject of M&A speculation both in 2015 and again in 2020. However, following a series of profit warnings in 2015, the stock price fell by around 75%, and its recovery

Lees verder >

07/01/2025

Analyse

This time, it’s not the house that wins, it’s the investor

This is a chance we simply can’t ignore. We’re looking at a company with a market cap of around €2.5 billion, while one of its divisions is about to be sold for a stunning €2.3 billion in cash. That means investors are set to receive a substantial portion of their investment back through a special dividend. And the best part? The company’s profitable growth engine – its B2B division – remains entirely under Playtech’s control. What’s left is a healthy, cash-rich tech company with a strong foothold in regulated gambling markets and plenty of room for further growth. Figure 1. Playtech share price performance over the past five years. Source: Google. Founding Playtech was founded in 1999 in Estonia by Israeli entrepreneur Teddy Sagi. Together with a team of software developers, multimedia experts, and professionals from the casino industry, he developed a comprehensive software platform for online gambling. From the outset, the company focused on B2B services, providing technology to online casinos, poker rooms, bingo sites, and sports betting platforms. Although Playtech was established in Estonia, it had an international outlook from the beginning and quickly expanded throughout Europe. The decision to go public in the UK was strategic: London offered an attractive platform for high-growth tech companies, including international ones. In 2006, Playtech went public, raising approximately £312 million with a valuation of around £550 million. The proceeds were used to fund international expansion, acquisitions, and continued product development. In 2007, Mor Weizer was appointed CEO—a role he continues to hold to this day. Under his leadership, Playtech has grown into one of the world’s leading gambling software providers. Business Activities Today, Playtech is a major global technology supplier to the gambling industry, offering a wide range of products and services. The company provides software solutions for both online and land-based casinos, sports betting, poker, bingo, lotteries, and live casino games. A key component of its offering is the IMS platform (Information Management Solution), which allows clients to manage all player data, payments, marketing, and game content from a single system. Playtech also operates dedicated live casino studios and develops its own slot machines and table games. Sports betting technology is offered through its subsidiary, Playtech BGT Sports. In addition to its B2B services, Playtech also operates B2C activities. Through its subsidiary Snaitech, the company offers gambling services directly to consumers in Italy, both online and in physical outlets. Sale of Snaitech In September 2024, Playtech announced the sale of its entire stake in Snaitech to Flutter Entertainment for €2.3 billion in cash. Snaitech is Playtech’s B2C arm, active in Italy in both online gambling and retail sports betting. The deal is expected to close in the second quarter of 2025. The sale aligns with Playtech’s strategy to fully focus on its fast-growing and highly profitable B2B operations. By divesting Snaitech—which is more capital-intensive and less scalable—the company sharpens its focus on technology and platform services for regulated gambling markets worldwide. Caliplay Agreement Also in September 2024, Playtech announced a new strategic agreement with Caliplay, its joint venture with Caliente in Mexico. The collaboration is being restructured, giving Playtech a 30.8% stake in a new U.S.-based holding company called Cali Interactive, which will focus on the rapidly growing regulated gambling market in the United States. The agreement ends a years-long legal dispute over contract terms and outstanding payments. For Playtech, the deal means direct revenues from Caliplay service fees will cease, but it gains the prospect of dividend income from Cali Interactive and a strategic position to participate in U.S. market growth. 2024 Results On March 27 (pre-market), Playtech reported its full-year 2024 results. The B2C division—mainly consisting of Snaitech—saw only 2% revenue growth. Margins were around 24.5%, lower than in B2B, and future growth is limited due to market saturation and increased regulation. The B2C model is also capital-intensive, requiring investment in retail outlets, marketing, and absorbing the risk of sports results. While Snaitech remains profitable, it offers limited scalability and few international expansion opportunities. In contrast, the B2B division performed strongly. In 2024, B2B revenue rose by 10%, and EBITDA grew by 22%, with the margin increasing to 29.4%. Growth was driven primarily by North and South America, including a doubling of revenue in the U.S. Client concentration also improved: the top five customers accounted for 42% of revenue in 2024, down from 51% a year earlier—making the revenue base more stable and less reliant on a handful of large clients. Looking ahead, management expects adjusted EBITDA of €250 to €300 million from 2025 onwards, with annual free cash flow of €70 to €100 million. These figures reflect only the remaining B2B operations, as Snaitech is being sold and Caliplay is now a minority holding. Growth in Online Casinos Both Europe and the United States are experiencing strong growth in the online gambling market, creating attractive opportunities for Playtech. According to a recent report by the EGBA and H2 Gambling Capital, Europe’s gambling market reached a gross gaming revenue of €123.4 billion in 2024, up 5% from 2023. Online gambling was the main driver, increasing by roughly 12% to €47.9 billion. Online now represents 39% of the total gambling revenue in Europe. This growth has been fueled in part by the legalization and regulation of online gambling in countries such as Germany and the Netherlands, where online casinos are gaining popularity and taking market share from land-based venues. The U.S. online gambling market also continues to expand rapidly, according to the State of the States 2024 report by the American Gaming Association. In 2023, the U.S. gambling market posted record revenue of $66.6 billion, a 10% year-on-year increase. While traditional casinos still account for the largest share—around $49.4 billion—it is the new formats like online sports betting and online casinos that are growing fastest. Online casino games generated $6.17 billion in revenue, a 28% increase from the previous year, driven by continued legalization and regulation at the state level. Strategy Figure 2. Playtech’s global B2B strategy.

Lees verder >

06/28/2025