Elders Ltd
ELD Details
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Raising capital to boost balance sheet: Elders Ltd (ASX: ELD) surged over 12.4% on June 17, 2016 as the group reported a capital raising of $102.4 million at $3.40 per new Share. This value comprises $25.0 million placement to institutional investors and $77.4 million of 1 for 4 Non-Renounceable Rights Issue to present shareholders. With these funds, the group intends to buy all Non-controlled Elders Hybrids (ASX: ELDPA) at $95.00 per Hybrid worth of $106.9 million. Meanwhile, the group has binding pre-commitments of worth $27.9 million from 4 large Hybrid holders to sell its Hybrids into the on-market Hybrid Acquisition. Elders is also seeking to pay a fully franked dividend for fiscal year of 2017 of up to 35% of underlying NPAT. Management reported that they are making efforts to remove Hybrids in line and invest in organic growth to achieve return on capital of over 20%. On the other hand, the group incurred over $247 million of tax losses and despite management issuing a positive guidance for its Australian businesses, they expect pressure to continue on its Live Export business.
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Recommendation: We give an “Expensive” recommendation on the stock at the current price of $4.08
Capital structure pro-forma (Source: Company Reports)
Aconex Ltd
ACX Details
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Analysts upbeat target price drove the stock: Aconex Ltd (ASX: ACX) stock surged over 9.2% on June 17, 2016 on reports of a $10 target price by Morgan Stanley analysts. These analysts indicated that ACX comprises a major “disruptive and scalable models” in the industry. Moreover, the group’s management reported that their software continues to gain traction in construction industry. ACX stock already rallied over 27.7% in the last six months (as of June 16, 2016) placing the stock at higher levels. Moreover, the challenging condition in the infrastructure coupled with ongoing volatility in the markets ahead of Brexit fears might impact the stock.
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Recommendation: We believe that the stock is “Expensive” at the current price of $7.00
CSR Limited
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CSR Details
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Solid performance: CSR Limited (ASX: CSR) stock surged over 7.3% on June 17, 2016 even though there is no specific update from the group. The group’s ongoing buyback initiatives coupled with Australian dollar fluctuation must have contributed to the increase in stock. CSR stock has already rallied over 27.9% in the last six months (as of June 16, 2016) driven by the group’s strong fiscal year of 2016 performance. The group reported a revenue and net profit after tax increase of 14% and 13% respectively. The group segment’s Building Products and Viridian EBIT rallied over 40% and 161% as compared to the same period of last year. On the other hand, despite today’s rally, Australian dollar has been strengthening against the US dollar which would impact the group’s Aluminum business.
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Recommendation: The stock looks “Expensive” at the current price of $3.68
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Aluminum EBIT movement (Source: Company Reports)