Corporate Travel Management Limited

Remarkable Results Across all Operating Regions: Corporate Travel Management Limited (ASX: CTD) is primarily engaged in managing the purchase and delivery of travel services for its clients. The company recently updated that the voting power of Mitsubishi UFJ Financial Group, Inc. increased from 5.01% to 6.92%. In another update, the company notified that the voting power of Morgan Stanley and its subsidiaries increased from 5.57% to 6.87%.

In the month of June, the company appointed Neale O’Connell as the new Global CFO, to begin the role from 9 July 2019.

1HFY19 Results: During the first half, the company reported total transaction value (TTV) amounting to $2,951.5 million, up 31% on the prior corresponding period. Underlying EBITDA for the period stood at $64.6 million, up 21% on the prior corresponding period. The company generated underlying NPAT excluding acquisition amortisation, amounting to $42.6 million, up 20% in comparison to pcp. Underlying EPS for the period witnessed a rise of 17%, at 39.4 cps in 1HFY19.


Group Results (Source: Company Reports)

Regional Performance: The company performed well in all the operating regions. TTV growth was maximum in case of Asia. TTV for the region was reported at $1,070.5 million, up 60% on pcp. Asia also saw the highest revenue and EBITDA growth of 47% and 34%, respectively.


Regional Highlights (Source: Company Reports)

FY19 Guidance: The company has issued FY19 EBITDA guidance range of $144 million - $150 million and is currently trading at the top end of the range, with 20% growth on pcp basis.

Growth Strategy: The company has in place a growth strategy for FY14-21 that includes three phases. The first phase covering the period FY14-17 involved the establishment of a global network through acquisitions. The second phase covering FY18-19 has been directed towards achieving TTV beyond $1 billion in each region. The third phase covering the period of FY20-21 will involve the realisation of potential in the first 2 phases to grow organically at optimum level.

Stock Recommendation: The stock of the company generated returns of 1.49% and -12.21% over a period of 1 month and 3 months, respectively. The company’s strong performance in the first half reaffirms its strategy to build a global network through its high-quality growth business model. Its diverse business model and global footprint provide an edge over competitors. The company has reported 5-year statutory EPS CAGR of 37% from the period starting 2013 to 2018. The company’s total transaction value has witnessed an 18-fold increase since its IPO. In 1HFY19, the company has an EBITDA margin of 31.0%, which is higher than the industry median of 26.1%. The company’s net margin for the period was 19.3% against the industry median of 10.1%. Considering the performance in the first half, the company’s growth profile and its business strategy, we give a “Hold” recommendation on the stock at the current market price of $22.750, down 1.472% on 01 August 2019.
 

BHP Group Limited

Production In-line with Last Year: BHP Group Limited (ASX: BHP) is engaged in mining of iron ore. The company also produces other commodities, including copper and uranium.

Highlights of June Quarter: During the quarter, the company produced 444kt of copper, reporting an increase of 6% on March quarter. Iron ore production during the quarter stood at 63mt, up 12% in comparison to the previous quarter. The company produced 30MMboe of petroleum that went up by 3% on the previous quarter. Overall, in terms of production of petroleum, the company exceeded full-year production guidance. The revised guidance for copper & iron ore was also met during the period. Due to adverse weather impact and lower than expected wash plant yields during the quarter, production of metallurgical coal and energy coal was marginally below the guidance. The company’s exploration program delivered encouraging results during the quarter, with success across seven out of nine petroleum wells.


Production Highlights (Source: Company Reports)

Outlook: The company expects group copper equivalent production for FY20 to be slightly higher than FY19, despite an approximate decline of 7% in petroleum volumes. Moreover, the company expects to meet full-year unit cost guidance for Western Australia Iron ore, Petroleum & Escondida. Costs for Queensland Coal and New South Wales Energy coal unit might see a marginal increase over the guidance.

Stock Recommendation: Over a period of 1 year,the stock has generated returns of 21.95% and has a market capitalisation of ~$120.07 billion. In the quarter ended 30 June 2019, the company reported decent operational performance across the portfolio, with an increase of 11% in group copper equivalent production. Despite the impact of grade and natural field decline, unplanned outages and weather impacts, overall production during the quarter was broadly in line with last year. In addition, the company is progressing well in terms of all the major projects under development. The strong underlying performance places the company in a position to deliver high volumes in FY20.

In 1HFY19, the company had an EBITDA margin of 49.3%, which is higher than the industry median of 34.6%. The company’s net margin for the period was 21.4% as compared to the industry median of 13.0%. Currently, the stock is trading towards its 52-week higher levels of $42.330 with PE multiple of 27.890x. Hence, considering the aforesaid factors and current trading levels, we give a “Hold” recommendation to the stock at a current market price of $40.260, down 1.227% on 01 August 2019.

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