Ainsworth Game Technology Limited

Segmental weakness Cuts Profit: Ainsworth Game Technology Limited (ASX: AGI) delivered NPAT degrowth of 16% to $ 31.9 Mn in FY18 as compared to the prior year. Gross Profit of the company was down by 8% in FY18 against FY17. It was mainly impacted by the decline in the number of units sold and the release of the A600 cabinet range in FY18 which has higher componentry cost compared to the legacy cabinets.  Earnings per share also came down at A$0.09 per share, a fall of 25% from the previous year EPS which was at $0.12 per share. North America is the largest market for the company wherein the group recorded moderate revenue growth of 4% (Y-o-Y) and amounted to A$ 105.7 million in the FY 2018. Besides this, International sales that account for around 76% of the group total sales, came down 3% to $202 million in FY18. It was primarily impacted by lower sales in Asia, Europe, and New Zealand. Based on the performance, the company declared fully franked final dividend of 2.5 cents per share and it will be payable on November 07, 2018 with the record date of October 05, 2018. This brings the total full-year dividend to 4 cents per share.


Revenue by Geography (Source: Company Report)

Total operating cost for the company surged 4% in FY18 as compared to the prior year at the back of rising sales, service & marketing (SSM) cost, and R&D expenses incurred during the period. SSM expenses increased in the financial year 2018 due to additional depreciation expense, higher selling, and marketing costs in the Americas region. The company, however, posted the strong closing cash balance of $35.7 million as at June 30, 2018 over $21.1 million in the previous comparative period. Moreover, intense competition, sluggish revenue in Asia and Europe and falling revenues in North America are the areas of concern for the company.

Stock Performance: The stock has generated YTD return of -46.30% and over one year wiped out almost 51.67% of its stock value. The price in the near term does not show any sign of recovery from the lower levels and is hovering around its 52-week low. By looking at its performance in FY18 and current trading level, the stock can be avoided at the current market price of $1.150.
 

Automotive Holdings Group Limited

Subdued Performance in FY18: Automotive Holdings Group Limited (ASX: AHG) reported NPAT attributable to members for the year ended 30 June 2018 at $32.64 million representing a drop of 41.2% against $55.54 million posted in FY2017. Revenue for the company came in at $6.47 billion in FY18 compared to $6.11 billion in FY17.

The major reason for the low NPAT was lower segment operating contribution and one-time cost related to the shutdown of underperforming businesses, M&A cost, write down of IT system and other non-recurring expenses. An automotive segment of the business continued to grow, posting revenue of $5.61 billion, an increase of 7.2%. Automotive segment benefitted from the growing new vehicles market in Australia and New Zealand. Further, revenue growth was also fueled by the expanding market share of the company, truck performance, and easyauto123 expansion. Margins came in this from the segment this financial year due to softening demand from manufacturers and consumers.

The company posted strong operating cash flow in FY18 at $147.3 million compared to $149.9 million in FY2017. Revenue of refrigerated logistics segment grew marginally at $598.3 million compared to $595.1 million in the FY17.


Operating Performance (Source: Company Report)

Stock Performance: The stock has generated YTD return of -32.79% and is trading below its long-term supporting trendline. However, over a few days, it has staged slight recovery from the low levels on decent volumes.  Given its position in the Australian market despite softer demand and weakness in market share in New Zealand, Automotive Holdings may bring some reversal in trends.We recommend a “Hold” rating on the stock at the current market price of $2.440.

 
 
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