Australian Pharmaceutical Industries Ltd

API Details

FY17 performance ahead of the revised guidance: On one hand, Australian Pharmaceutical Industries Ltd (ASX: API) smashed out at retail landlords asking for hefty rent prices; and on another hand, the group reported for a 5.4% growth in FY17 underlying net profit after tax (NPAT) to $54.2m, and this is slightly ahead of the company’s revised full year profit guidance that was issued in August 2017. The group reported about $1.8m in one-off costs associated with the offer to acquire Laser Clinics Australia. The total revenue in FY17 has increased 5.8% to $4.06 billion while the company’s reported EBIT has increased 2.5% to $89.3m on the prior year and underlying EBIT grew 5.5% to $91.9m. API has retained a strong market position in its core businesses, despite the challenging market conditions the company faced during 2017. Moreover, the Priceline Pharmacy network grew by 20 stores, up to 462 stores from 442 at the end of FY16. The company has further reinforced the ongoing new store pipeline that is expected to realise more than 20 new Priceline Pharmacies during the coming year.
 
API also expects that the improved earnings performance of the New Zealand manufacturing business experienced during the second half of FY17 will be sustained during the FY18. Primarily, the performance of the New Zealand manufacturing business got improved in the second half due to the new manufacturing contracts while overall sales had declined by 5.4% and gross profit slipped by 6.8% compared to the prior year. Additionally, API expects that it will continue growth in its Priceline Pharmacy network and its Pharmacy Distribution business would remain stable. Further, API will continue to generate operational improvements due to the significant capital investments made in prior years. The company is also putting efforts to position itself as a leading mass market health and beauty retailer in Australia. Meanwhile API stock has fallen 12.71% in last three months as on October 18, 2017 and is trading at a reasonable level given the price to earnings scenario. The stock rose 4.4% on October 19, 2017 with the release of the latest result. We give a “Buy” recommendation on the stock at the current price of $ 1.65


FY17 Financial Performance (Source: Company Reports)

RCR Tomlinson Ltd

RCR Details

Awarded Power Generation Project in Indonesia: While RCR Tomlinson Ltd.’s (ASX: RCR) pipeline has increased significantly from FY14 and new contract wins in FY17 have been encouraging boosting the stock momentum, growth might be a little slow from here given the valuation scenario. Recently, RCR has been awarded a contract with PT Kartanegara Energi Perkasa (KEP) for a combined cycle to be added to KEP’s existing open-cycle 92MWe gas-fired power plant in Senipah, Indonesia. The project, valued at more than AUD $75 million, is considered a significant one for the Energy business and will be a base load project for FY18. Meanwhile, RCR stock rose 6% on October 19, 2017 and 41.3% in last six months as on October 18, 2017; and is already trading at a high level. We give an “Expensive” recommendation on the stock at the current price of $ 4.50

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