CIMIC Group Ltd (ASX: CIM)
CIM Details
Partnerships for delivering value to clients: CIMIC Group via its global mining service provider, Thiess has inked two contracts with a combined revenue of $440m to provide mining services at BHP Billiton Mitsubishi Alliance’s (BMA) Caval Ridge and Peak Downs coal mines in Qld’s Bowen Basin, Australia. Thiess is expected to deliver mining services over a period of three years for activities that include the services required for Caval Ridge Southern Circuit (CRSC). The group indicates this win to be a part of the on-going commitment to optimise value to clients and deliver better mining solutions and productivity efficiencies.
On the expansion front with respect to its renewable market footprint, the group announced that its group company, UGL was awarded a contract by Foresight Solar Australia to design and build stage one of the Bannerton 110MWDC Solar Park near Robinvale in Vic. A revenue figure of $133m was said to be generated through this contract over a three-year term. UGL will undertake the engineering, procurement and construction of stage one of the solar park, including associated substation and Powercor Australia grid connection. The contract will commence in late 2017, and is expected to be generating power to the grid from July 2018. The group has also refinanced and expanded its $2.6b syndicated bank facility to support its long-term strategy on business opportunities. In last one year, the stock has moved up over 53%, as at October 24, 2017, and trades at a higher level. Looking at the trading scenario, we put an “Expensive” recommendation at the current price of $47.42
Wesfarmers Ltd (ASX: WES)
WES Details
Growth slows at Coles:Wesfarmers’ stock has plunged about 2.9% on October 25, 2017 while the group indicated for slower sales growth at Coles during its first quarter 2018 trading. In an attempt to compete with Woolworths and Aldi, the group had been working on slashing the prices, but this still led to a meagre 0.4% rise in Coles’ same-store sales in the three months ended September 30 against the growth of 0.7% in the June quarter and 1.8% in the previous corresponding period. Sales in convenience stores dropped by 9.5% to $1.4 billion and was the key drag on Coles’ total sales that were down 0.3% to $9.37 billion while headline food and liquor sales in the September quarter surged 1.5% at the back of opening of five new liquor stores. Fresh produce deflation did weigh on the sales to some extent. Overall, the group’s move on cost savings into price reductions and service in the June half 2017 and September quarter does not seem to be auguring well with the revival strategy. The high level of competition and drop in market share have been impacting Coles for quite some time now.
First Quarter Sales (Source: Company Reports)
While Bunnings’ Australian operations witnessed total sales rising by 11% over the quarter and on previous year, total UK and Ireland sales plunged by 17.5% on the previous corresponding period with store-on-store sales falling 12%. Kmart saw a 9% rise in quarterly sales, while Target chain slipped by 6.4% in terms of sale owing to lack of right mix of products and continued reset in price and range.
The group also released its quarterly statement of production, development and exploration with coal production for the quarter of 3,006,000t, which is 1.6% lower than the previous quarter. Metallurgical coal production of 2,119,000t was up 3.9% over the previous quarter while steaming coal production of 887,000t was 12.6% lower than the previous quarter due to average steaming coal production in the prior quarter.
Given the weaker than expected performance and ongoing challenges, we put an “Expensive” recommendation at the current price of $41.49
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