Boart Longyear Ltd
BLY Details
Dipping revenue: Boart Longyear Ltd (ASX: BLY) in 2015 had reported fall in revenue of 15% which is about $131 million to US $735 million and the forex movements including the weaker Australian dollar is the key driver as it formed $74 million part of the decrease. Additionally, the price of the commodity was down $30 million and volume was down $27 million. Even in the first quarter of 2016, BLY has reported 24% fall in revenue to US $142 million and the company had an adjusted loss after tax of US $55million. If the effect of currency movement is removed, then the revenue would be down 19%. Moreover, the drilling services pricing was down 3% and the product pricing was flat in the first quarter of 2016. The debt in the first quarter also increased 19% which is US $101 million. BLY has spent most of the first quarter of 2016 for field testing its new LF160 surface coring rig along with new tooling and instrumentation innovations that would help with productivity on the drill site. The net working capital has decreased from 31
st March 2015 levels primarily due to continued reductions in excess inventory and lower receivables due to lower revenues, which were partially offset by lower payables on reduced spending.
First Quarter 2016 Divisional Results (Source: Company Reports)
On the other hand, BLY’s liquidity position as at 31
st March 2016 was about $81 million which comprised cash balances totaling $71 million and a further $10 million of availability was under the BLY’s asset-based loan facility. BLY is focusing on cost reductions and improving the cash flow from operations but it would take time for the company to return to profit.
Company’s corporate credit rating is affirmed at ‘CCC+’ by Standard & Poor’s with a stable outlook while Moody’s lowered corporate family rating to ‘Caa2’ with negative outlook maintained. With the recent recovery in the commodity prices, BLY stock has risen 75.44% in the last six months (as of July 15, 2016) placing the stock at unreasonable levels. Based on the foregoing, we give a “Sell” recommendation on the stock at the current price of $0.11
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BLY Daily Chart (Source: Thomson Reuters)
Trade Me Group Ltd
TME Details
Mixed performance with rising expenses: Trade Me Group Ltd (ASX: TME) released its new smartphone optimized design in April 2016, and is currently in testing with circa 25% of all mobile web users and has plan to roll out across all devices over the coming year. Recently, the group reported that the average salary for roles listed on Trade Me enhanced by 1.1% this quarter to $61,095. TME reported that most of the regions witnessed enhanced average salaries. But Wellington region fell 2.3% to $67,351. Bay of Plenty fell 2% to $53,748 while Wellington City delivered strong growth with an average rate of pay at $72,958, which is more than $1500 higher than Auckland City. Meanwhile, TME has invested relatively heavily from the last three years for the future growth in each of the verticals and the marketplace business but the business has to return to profitability growth. In addition, TME also invested in new business like Harmoney and plans to do more in the future as well as to expand into closely complementary businesses. Trade me Insurance is in embryonic phase for which the company is yet to begin leveraging their competitive advantage and for which trials are underway. The group completed the refinancing of the debt facility, which has been split into two equal tranches maturing in December 2018 and December 2019; and the company’s total first half of 2016 capex was $11.4 million and for FY 16, it is expected to be about $25 million.
First half of 2016 Financial Performance (Source: Company Reports)
On the other hand, the recent economic volatility coupled with consumer confidence and employment performance looks little challenging for the coming months. Accordingly, TME could deliver just 0.3% growth in the first half of 2016 against the prior corresponding period, due to rising expenses. TME stock has risen 22.87% in the last six months (as of July 15, 2016) driven by the group’s initiatives. We believe investors need to book their profits in the stock given the above and we give a “Sell” recommendation at the current price of $4.70
TME Daily Chart (Source: Thomson Reuters)
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