Landmark White Limited

A Brief About Acquisition: Landmark White Limited (ASX: LMW) recently came to know from CoreLogic, its corporate partner, that a dataset containing property valuation and some personal contact information has been disclosed. Although, currently there is no evidence of misuse of any information, however, the company conveyed of taking immediate steps to investigate and prevent any potential misuse of information and will take the course of law as required.

Updated FY19 guidance and strategy (Source: Company Report)

The company acquired Taylor Byrne which was funded through the issue of 8.5 million shares coupled with a bank loan of $5 million. The acquisition is anticipated to deliver an additional profit before tax of approximately $2.3 million on an annualised basis once integration has been completed and synergies realised.

What to Expect From LMW: As per the updated guidance, the company expects the FY19 revenues to be $55.0 million, EBITDA to be $5.3 million (normalised to remove one-off acquisition costs $5.8 Million) and NPAT to be $2.8 million (normalised $3.3 Mn).Additionally, for FY19, the company expect EPS to be around 3.6 cents per share (normalised circa 4.3 cps).

Going forward in FY19, the acquisition is expected to deliver an increase in profit before tax of approximately $1.3 million with partial delivery of synergies and improved margins driven by the insourcing of valuations previously sub-contracted to licensees and third-party valuation firms. The company experienced a significant reduction in valuation instructions from the first-tier lenders as a result of tighter regulation of credit from APRA as well as the adverse impact of the lenders’ reaction to the Banking Royal Commission during the September through December 2018.

Meanwhile, the stock has generated negative YTD return of 7.45% and is hovering around its 52-week low. We presume that there is a lack of favourable catalyst at the current price which can support the stock higher. Based on the foregoing and current trading level, the stock can be avoided at the current market price of $0.425 (down 2.299% on 13 February 2019).
 

Cromwell Property Group

Extension Of On-Market Buy-Back Event: Cromwell Property Group (ASX: CMW) has recently announced about the extension of its on-market buyback event as part of its ongoing capital management programme. As per the release, the buy-back will continue till January 17, 2020 and would be continuing till maximum stapled securities are purchased or till the company revokes buy-back earlier. As per the release, the company will purchase a maximum of 194,325,974 stapled securities during the course of the buy-back period. For that, the company will not fund any buy-back through any borrowed funds rather primarily use its cash reserves to do so. It may also use the proceeds of any asset sales for the purposes.
 

Financial Results Summary (Source: Company report)

On the financial front, total revenue of the company stood at $446.7 million in FY18 compared to $320.8 million in FY17, up by ~39.24% Y-o-Y, primarily on the back of rental income and recoverable outgoings and Share of profit of equity accounted investments.The net profit, however, stood at $204.1 million in FY18 compared to $277.5 million in FY17, down by 26.5% primarily on the back of higher operating expenses.  Among the key ratios, the current ratio increased significantly by 62.9% to 1.81x in FY18 from 1.11x in FY17.

What To Expect From CMW: The guidance for FY19 includes that the company will maintain transactional and funds management revenues consistent with its historical performance. Going forward, in FY19, operating earnings is expected to be not less than 8.00 cents per share and a minimum distribution of 7.25 cps.

The stock has generated YTD return of 10.66% and 5.49% and 9.0% returns approximately over the last three- and one-month period respectively. It is trading at a reasonable PE level of 10.02x, displaying undervalued position at the current juncture. Considering the stock performance in the past few months with higher current ratio, we have a favourable view on the stock, thus, we maintain our “Buy” rating on the stock at the current market price of A$1.080 per share.
 

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