Orora Limited

Rise in Capital Expenditure: During FY 2018, Orora delivered strong performance by meeting its financial objectives and delivering increased value for shareholders. Despite facing flat trading conditions in Austrian and North American Market, the company managed to achieve double digit profit growth. Through higher sales to existing customers, incremental revenues from the Orora Visual acquisitions and increased revenues in Fibre, the total sales revenue of the company increased by 5.2% to $4,248 million in FY 2018 as compared to previous year. The underlying EBIT of the company increased by 7% to $323.4 million in FY 2018. The gains from the earnings were partially reduced by impact of a doubtful debt provision of $2.8M, and higher input costs with NSW electricity costs increasing $4.5M. The average total working capital to sales was 9.1% (versus 8.4% in FY 2017) which reflects a continued emphasis on working capital optimization across the company. A commitment to financial discipline and a strong balance sheet resulted in operating cash flow for the period of $325.3 million, which is in line with the last year. Cash conversion was at 67 percent, down from 74% in the last year, but in line with management’s expectations as a result of the increased capital expenditure across the business to upgrade assets and enhance productivity. The Company’s board declared a final ordinary dividend of 6.5 cents per share, franked to 30 percent. This takes the total dividend for the financial year ended 30 June 2018 to 12.5 cents per share, which is an increase of 13.6 percent over the last year. The company is maintaining a current ratio of 1.19x. Meanwhile, the share price declined 6.4 percent in the past three months as of October 17, 2018 and traded at reasonable PE level of 19.04x. As of now the stock traded at a discount to 12-month high of $3.72 against lower premium to 12-month low of $3.11. ORA’s shares traded at $3.36 with a market capitalisation of $4.07 billion as on 18 October 2018. The stock is a ‘watch’ at the current price while we look for key catalysts for growth.
 

Amcor Limited

Improving fundamentals: In FY 2018, Amcor Limited witnessed relatively difficult marketplace condition with high material prices, unfavorable product mix, soft demand volumes etc. However, the overall financial results of the company were still sound. Compared to FY 2017, the PBIT of the company in FY 2018 was 2% lower to $1,085.5 million. The net cash flow from operating activities of the company decreased from $1,027.4 million in FY 2017 to $937.1 million in FY 2018. The company was having free cash flow of $194.1 million in FY 2018. The total assets of the company decreased by USD 36.6 million during FY 2018. This decrease mainly relates to the movement of the US dollar against many of the currencies in which assets are held. The company is maintaining a current ratio of 0.699x. The company has effectively integrated and derived value from 26 acquisitions completed over the past six years. The H1 of 2019 is expected to be better than H1 2018. The company’s free cash flow is expected to be in between $200 million and $300 million. The company expects to grow through a pragmatic, but disciplined, approach to mergers and acquisitions. Meanwhile, the share price declined by 6.82 percent in the past three months as of October 17, 2018 and traded at reasonable PE level of 15.8x. As of now, the stock traded at a significant discount to 12-month high of $16.1 against lower premium to 12-month low of $12.81. AMC’s shares traded at $13.22 with a market capitalisation of $15.5 billion as on 18 October 2018. We give a “Buy” recommendation on the stock at the current price of $ 13.220.
 

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