Atlas Arteria

ALX Details

Pricing of Euro Bonds: Atlas Arteria (ASX: ALX) is an operator and manager of a portfolio of toll-road assets. The market capitalisation of the company stood at $5.92 billion as on 28^th September 2020. Recently, the company announced the successful pricing of €500 million of bonds under its Euro Medium Term Note Programme by APRR. The company is likely to use the funds for refinancing of debt and for general corporate purposes.

H1FY20 Results Highlights: For the half-year ended 30^th June 2020, the company reported net profit after tax (excluding notable items) of $9.1 million as compared to $88.2 million in 1H FY19. The company cemented its balance with equity raising of $495 million. The company possesses decent liquidity of around $216 million at the corporate level following the receipt of $75 million from the Security Purchase Plan on 2 July 2020 and no debt covenant constraints. In addition, the company has decided to pay a half-year dividend of 11.0 cents per share on the estimated payment date of 5^th October 2020.

Key Financials (Source: Company Reports)

Outlook: The company seems to be well-positioned to pursue growth opportunities as they arise. For 2H FY20, the company is focused on growth opportunities to create sustainable cash flows and lengthen the average concession term. The company is scheduled to release its Q3 FY20 traffic and revenue data on 21^st October 2020.

Valuation Methodology: P/BV Multiple Based Relative Valuation Method (Illustrative)

P/BV Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: Current ratio of the company stood at 2.30x in 1H FY20 as compared to the industry median of 0.75x. This indicates that the company is well-placed to address its short-term obligations against the broader industry. In the past six months, the stock has provided a positive return of 18.20%. On the technical analysis front, the stock of ALX has a support level of ~$6.01 and a resistance level of ~$6.661. We have valued the stock using the P/BV multiple based relative valuation method (illustrative) and have arrived at a target price with an upside of low double-digit (in percentage terms). For the purpose, we have taken peers such as Qube Holdings Ltd (ASX: QUB), Boral Ltd (ASX: BLD), Downer EDI Ltd (ASX: DOW) to name few. Therefore, considering the strengthened balance sheet, decent outlook, and dividend payment, we give a “Buy” recommendation on the stock at the current market price of $6.180 per share, up by 0.162% on 28^th September 2020.

ALX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

AML3D Limited

AL3 Details

Purchase Order from Austal: AML3D Limited (ASX: AL3) provides commercial large-scale “Additive Metal Layering” 3D printing services to Defence, Maritime, Automotive and Resources customers. The market capitalisation of the company stood at $73.46 million as on 28^th September 2020. Recently, the company announced that it has received a purchase order from Austal Limited to deliver an evolutionary lifting device, Davit Arm following successful completion of the design and optimisation phase. On 3^rd September 2020, the company implemented a contract with Austal to develop an additively manufactured component for the maritime defence industry. For the year ended 30^th June 2020, the company reported sales revenue amounting to $288,156. The loss before tax for year amounted to $3,094,021 in FY20, mainly attributable to expenditure related to the expansion of the company.

Key Financials (Source: Company Reports)

Market Opportunities: The company is optimistic about the immense market opportunity on the back of the additive manufacturing industry, which is currently valued over US$10 billion and is likely to grow to US$35.6 billion by 2024. The company is likely to conduct its Annual Shareholders Meeting on 5^th November 2020.

Stock Recommendation: The stock of AL3 has moved up by 58.57% and 246.88% in the last one and three months, respectively. As a result, the stock is inclined towards its 52-week high level of $0.730. On the technical analysis front, the stock of AL3 has a support level of ~$0.525 and a resistance level of ~$0.600. Hence, considering the past movement in the stock, current trading levels, rising losses, and limited financial information on the face of recent listing, we advise investors to avoid the stock at the current market price of $0.565 per share, up 1.802% on 28^th September 2020. However, we would like to keep an eye on the business activities, operational and financial performance of the company. Moreover, any change in fundamental factors will require a re-evaluation of the stock.

AL3 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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