Significant Uptrend in International Export Value

Quick Look at Data on Related Industries

Encroaching into Retail and LNG Space to Identify Driving Factors

Key Risks and Challenges

Outlook

Considering the trending value of international exports, 3 ASX stocks are identified to showcase the momentum.

(1) Santos Limited (Recommendation: ‘Buy’ at AUD 7.050, Potential Upside: Low Double-Digit)

(M-cap: AUD  23.32bn, Annual Dividend Yield: 2.80%)

Company Overview: Santos Limited (ASX: STO) supplies natural gas in Australia and Asia. The company has a portfolio of high-liquefied natural gas (LNG), pipeline, and oil assets.

Trending Price Trajectory Amplifying Financials: In FY21, production increased to 92.1 mmboe*, up by 3%, while sales volume dipped by 3% to 104.2 mmboe. Despite the marginal change in sales volume, product sales revenue advanced by 39% to USD 4,713mn and consequently, underlying profit expanded by 230% to USD 946mn. The amplified fundamentals were supported by a significant increase in oil and LNG prices.

Setting New Records with High Average Realised Prices: For 1HFY22, STO delivered a record sales revenue of USD 3.8bn, up by 85% PcP, and a record high free cash flow of USD 1.7bn, up by 199% PcP. The record free cash flow level curtailed gearing to 22.5% as on 30^th June 2022. Average realised prices for LNG and Crude oil stood at USD 14.19/mmBtu* (1HFY21: USD 6.74/mmBtu*) and USD 116.28/barrel (1HFY21: USD 69.57/barrel), respectively.

Outlook:  STO stands on track to deliver merger integration synergies with USD 95mn in sustaining annual synergies achieved in the first six months of integration. USD 174mn of the initial USD 250mn on-market share buyback was executed by the end of 2QFY22.

*mmboe refers to million barrels of oil equivalent. mmBtu refers to million British thermal units.

(2) Temple & Webster Group Limited (Recommendation: ‘Speculative Buy’ at AUD 4.620, Potential Upside: Low Double-Digit)

(M-cap: AUD 566.99mn, Annual Dividend Yield: 0.00%)

Company Overview: Temple & Webster Group Limited (ASX: TPW) is an online homewares and furniture retailer with a range of 200k products from several suppliers.

Setting Record High Top-Line: In FY21, TPW clocked a record year for revenue, customers, and NPAT, setting a growth of +85% YoY to AUD 326.3mn, +62% YoY to 778k customers, and +165% YoY to AUD 14.0mn (on a normalised basis), respectively. The year remained positive cash flow with a 141% increase in EBITDA and a cash balance of AUD 97.5mn as of 30^th June 2021.

1HFY22 Financial Highlights: TPW continued to be Australia’s fastest-growing retailer with a sixth consecutive quarter of growth in revenue per active customer. 1HFY22 revenue shot up by 46% YoY, with EBITDA surging by 5.1% (above the FY22 target range of 2-4%). Fixed cost as a percentage of revenue stood at 8.7% relative to 7.8% in 1HFY21,owing to investment in key areas, for instance, logistics, tech, and customer care.

Outlook:  The company is focused on reinvesting cash flows in technology development, marketing, product range expansion, and overall customer experience. The objective stands to achieve economies of scale by expanding product sourcing, marketing activities, and logistics.

(3) Blackmores Limited (Recommendation: ‘Hold’ at AUD 79.270, Potential Upside: High Single-Digit)

(M-cap: AUD 1.49bn, Annual Dividend Yield: 1.36%)

Company Overview: Blackmores Limited (ASX: BKL) manufactures and supplies vitamin, herbal, and mineral supplements and natural skin and hair treatment products in Australia and New Zealand.

Improving Gross Margins Warranting Operational Efficiency: In FY21, BKL clocked a revenue of AUD 575.9mn, up by 1.3% PcP. Gross profit stood at AUD 301.0mn, up by 4.6% PcP, with gross profit margin up by 1.6ppts* to 52.3%. Group EBIT stood at AUD 45.8mn, up by 82.5% on PcP.

1HFY22 Financial Highlights: BKL revenue stood at AUD 346.0mn, up by 14.3% PcP or 14.9% uptick on a constant currency basis. The company continued executing its strategic cost-out and efficiency savings game plan. Gross profit stood at AUD 187.6mn, up by 19.4% PcP, with gross profit margin extended by 2.3ppts to 54.2% and as of 31^st December 2021, net cash stood at AUD 89.4mn with strong operating cash flow conversion.

Business Update: BKL is expected to announce its FY22 full-year results on 18^th August 2022.

Outlook: Total A&P investments are expected to range between AUD 10mn and AUD 15mn higher in H2FY22. Investments in supply chain capabilities have strengthened BKL and underpinned the ability to meet customer demand.

*ppts refers to percentage points

Comparative Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance. 

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 08^th August 2022. The reference data in this report has been partly sourced from REFINITIV. 

Note 3: Investment decisions should be made depending on an individual’s appetite for upside potential, risks, holding duration, and any previous holdings. An ‘Exit’ from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above. 

Technical Indicators Defined: - 

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

---

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.