Five Commercial Services & Supplies Stocks

Broadspectrum Ltd

               BRS Details
 
Ferrovial Takeover Bid:Broadspectrum Ltd (ASX: BRS) stock has fallen 24.62% this year to date (as at December 11, 2015). The company has issued an update on the unsolicited takeover offer from Ferrovial Services Australia Pty Ltd for the company. The offer is for all the issued shares in the company for cash consideration of $ 1.35 per share and the offer is subject to a number of conditions, including a minimum acceptance of 50.01% and Foreign Investment Review Board approval. BRS board has advised the shareholders to take no action. BRS also noted that the shares were trading above $ 1.60 as recently as June 2015.
 

Underlying EBITDA Growth and Operating Cash Performance (Source: Company Reports)
 
Additionally, it is also noted that the company has delivered significant milestones in the last 12 months including a strong level of work on hand off around $ 10 billion, and preferred positions secured on a number of additional key contracts in excess of $ 2 billion. The company has been able to reduce gearing to below 2x net debt/EBITDA as of 30 June 2015 and reiterated FY 2016 earnings guidance in its October AGM. However, we believe that at its current stock price, the share is expensive and the small premium in the acquisition offer does not justify a buying position.
 
 

BRS Daily Chart (Source: Thomson Reuters)
 

Ariadne Australia Ltd

 
                   ARA Dividend Details
 
Financial Results’ Update: Ariadne Australia Ltd (ASX: ARA) stock has fallen 6.33% this year to date but consolidated 1.37% in the last five days (as at December 07, 2015). The company issued an update on the anticipated financial results for the half year to 31 December 2015, advising that the net profit before tax attributable to members for the period is currently expected to be in the range of $ 3 million - $ 4 million compared to $ 0.9 million reported for the same half year in the previous year. The above result is also subject to operating performance of subsidiaries and associates, movements in equity markets and foreign exchange rates, and result of the appeal against the $ 6.9 million judgement entered into against Secure Parking Pty Ltd. The outcome of the appeal is supposed to be handed down within the next few months. The company already adopted a prudent approach by providing for its proportionate share of the amount of the judgement and estimated related costs in the 30 June 2015 accounts. Earlier, the accounts for FY 2015, ending 30 June provided a poor and unsatisfactory result. The company reported a net loss after tax attributable to members of $ 3.6 million in contrast to the profit of $ 6.3 million in the previous year. A positive contribution of $ 1.7 million was reported last year, rising from gains on the group’s strategic portfolio and forex movement which reduced the net loss for the year to $ 1.9 million compared to a profit of $ 10.5 million in the previous year. We hardly note any great prospects for the company and believe that the share is expensive at the current price.
 
 
ARA Daily Chart (Source: Thomson Reuters)
 

Brambles Ltd

            BXB Dividend Details
 
Expected Improvement in ROCI: Brambles Ltd (ASX: BXB) with its recent announcements expressed a probable expansion of capital base by US $1.5 billion to FY19. This may however be pulled down by any softness in revenue growth and Return on capital invested (ROIC). Nonetheless, the company stated about US$475 million of net growth capex guidance for FY16 and the group expects to have incremental improvement in ROCI to 20% by FY 2019. This 20% objective demonstrates disciplined capital allocation while avoiding any temptation to prioritise short-term financial outcomes. The company sees considerable unserved opportunities for pallets in all markets and reflects the estimate of addressable FMCG standard size opportunities in currently served countries only. These include markets in North America, Latin America, Europe and Africa, India and Middle East. As per the company, there are multiple factors which will drive improvements in ROCI including the opportunity to support high single digit sales growth, as well as the One Better program, amortisation of intangibles already identified, and improvements in asset utilisation.
 

Segment-wise Result (Source: Company Reports)
 
However, company’s ROIC target have been set exclusive of the impact of merger or acquisition activity. Further, operational risks may prevail. We consider that despite the factors in favour of the company and the 10.15% surge in BXB’s stock in last three months (as at December 11, 2015), there is little upside to be seen. The stock rose only 0.09% this year to date (as at December 11, 2015). We believe that the stock is still expensive at the current price.
 
 
BXB Daily Chart (Source: Thomson Reuters)
 

Mcmillan Shakespeare Ltd

            MMS Dividend Details
 
Growth in UK and Record Result: Mcmillan Shakespeare Ltd (ASX: MMS) announced an expansion of its UK presence by acquiring one of the largest asset finance brokers in that country, Anglo Scottish Asset Finance. Further, 100% of the shares are being acquired in the privately owned UK Company and the consideration is an upfront cash payment of GBP 7.7 million and a potential earn-out payment of a maximum of GBP 7 million, based on the achievement of a three year cumulative EBITDA target up to 31 December 2018. The acquisition is funded from cash reserves. This provides another building block in the creation of an integrated asset finance and asset management business in the UK, which started in 2013 and was built upon by the acquisition of CLM Fleet Management in 2013. The company expects that Anglo Scottish’s comprehensive network of funder relationships and technology platform will help get best deal for UK businesses. Anglo Scottish, in turn, will benefit from the company’s strong capabilities in areas such as vehicle contract hire and fleet management with support from the group’s substantial financial resources.
 

Spread of Dealers (Source: Company Reports)
 
Even MMS’s used cars platform would drive FY16 growth at the back of acquisitions relating to Presidian in February 2015 for $115m and UFS for $42m in July. Both companies are expected to contribute $19.7m in EBITDA over a full year. The financial highlights for the company for FY 2015 include consolidated net profit after tax of $ 67.5 million, a growth of 23% over the previous year with underlying net profit after tax of $ 70.2 million, a growth of 26% over the previous year. The final dividend was $ 0.27 per share fully franked and the total dividend for the year was 52 cents per share fully franked and the total payout ratio was 63%. The company has reported good results and the new acquisition will further strengthen its position in the UK leading to better future prospects. The stock surged 22.05% this year to date (as at December 11, 2015). As such, we would rate the stock as a “Buy” at the current price of  $13.00
 
 
MMS Daily Chart (Source: Thomson Reuters)
 

Cabcharge Australia Ltd

                  CAB Dividend Details
 
Targeting Global Parking Systems through Innovation: Cabcharge Australia Ltd (ASX: CAB) recently entered into a joint technology innovation agreement with parkIQ Pty Ltd (global supplier of cutting-edge car parking systems). Coupled with the latest advancements from CAB’s new technology team, parkIQ has created a revolutionary and simple system for implementing “Windows up” technology to prevent customer from even rolling down the car window to enter, exit or pay. This technology will be delivered to some of the world’s largest car park operators including Secure Parking, an Australian-based car parking organisation. This agreement will not have a significant impact on reported earnings, but is a useful addition to the portfolio of products developed by the company. CAB also announced about the planned release of the new version of the 13Cabs mobile application in Victoria. The company has implemented an enhanced booking process in Sydney leading to a 13% year on year surge in phone bookings in the month of September 2015.
 

Performance Highlights (Source: Company Reports)
 
Meanwhile, for the financial year FY 2015, the company reported revenue of $ 188 million with normalised profit after tax of $ 56.8 million and gross debt of $ 128.2 million. Net profit after tax comes to $ 46.5 million and a full-year dividend fully franked is 20 cents per share. There was record fleet growth in taxi services to 7259 cars, an increase of 533 (7.9%) over the previous year. There has been continued growth in taxi fares processed to $1,118 billion, an increase of 8.6%. Despite the impressive performance and the financial progress, we believe that the prospects of the company in the future do not justify the current stock price which we find to be overvalued.
 
 
CAB Daily Chart (Source: Thomson Reuters)

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