Crown Resorts Limited

Strong revenue growth coupled with cash improvement: Crown Resorts Limited (ASX: CWN) is one of Australia’s largest entertainment groups and contributes to sectors like Australian tourism, employment, training and social responsibility programs. The core businesses and investments of the business is into resort sector, with the company’s assets including Crown Melbourne Entertainment Complex and Crown Perth Entertainment Complex. It also operates in its fully owned licenced casino in London.
 
Key Highlights of Crown Resorts:

 

• Improving the underlying performance of Crown Melbourne and Crown Perth going forward.
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• Deliver the Crown Sydney project on time and on budget.
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Group Performance (Source: Company Reports)
 
The revenue is up by 4.5% approximately Y-O-Y and stood at $3,493.0 million in FY18, which was mainly driven by the revenue from business mix. The company had an operating margin drop of 37.6% in FY18 over the prior year on the back of higher total operating expenses primarily from the gaming business. The asset turnover ratio improved significantly Y-O-Y by 9.1% on the back of improved sales. The company has an improved current ratio of 2.46x in FY18, increased by 35% approximately, driven by lower short-term interest-bearing loans and borrowings. The cash & cash equivalents improved on the back of improved net CFO which stood at $731.7 million in FY18 as compared to $465.7million in FY17, an increase of 57% approximately on a YoY basis. CFO improved on lower borrowing costs and higher receipts from customers. Meanwhile, the stock has fallen 10.89% in the past six months and is trading close to lower level. It has a market capitalisation of ~$8.15 billion with PE multiple 14.82x as of January 10, 2019. Given the mixed scenario, we maintain our “Hold” recommendation on the stock at the current market price of $12.110.
 

Coca-Cola Amatil Limited

 
Strong ROCE on half-yearly basis: Coca-Cola Amatil Limited (ASX: CCL)is working under Consumer Staples sector, and the company is into the business of manufacturing, distribution and marketing of beverages. The company has the following segments – Alcohol and Coffee Beverages, and Non-Alcohol Beverages.

 
Key Highlights:

 

• Capital expenditure of $134.8 million 1H18, higher than 1H17, reflecting investment at Richlands facility in Queensland and expansion in New Zealand.
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• Decision to bring forward $40 million of reinvestment from the expected cost savings in 2019 and 2020.
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• As per the company outlook for future, the balance sheet to remain conservative with flexibility to fund future growth opportunities.
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Return on Capital Employed (Source: Company Reports)
 
On the financial front, the company has recorded statutory Underlying EBIT of $176.3 Mn in 1HFY18, decreasing by 3.6% on Y-o-Y basis. Underlying NPAT declined by 5.9% to $178.8 million in the first half of FY18. Free cash flow was $63.8 million, a decrease of $75.9 million from 1H17. Net debt increased by $185.9 million to $1,452.7 million from 1H17 primarily due to share buyback program in 2017. The net margin stood at 6.8% as of June 2018, up by 0.7% from the previous corresponding period. The asset turnover, ROE and Pre-tax ROA improved from the previous corresponding period by 2.5%, 2.2% and 0.5% respectively. The ROIC grew by 0.5% in 1H FY18 as compared to the previous corresponding period, however the ROCE stood strong at 20.3% in 1H FY18 as compared to the previous corresponding period.  Meanwhile, the stock has fallen 14.29% on the past six months as at January 09, 2019 and is trading at reasonable PE multiple of 13.22x with the market capitalisation of $6.04 billion. Given the backdrop of improving financials and high demand of its product mix in the market along with product innovation, we maintain our “Hold” recommendation on the stock at the current market price of $8.150 (down 2.278% on January 10, 2019).  
 

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