Fonterra Shareholders' Fund 

FSF Details

Q1FY20 Operating Highlights for the Period Ended 31 October 2019: Fonterra Shareholders' Fund (ASX: FSF)acquires Economic Rights and issue units to investors. FSF announced quarterly results wherein, the company posted a revenue of NZ$4.3 billion as compared to NZ$3.8 billion in Q1FY19. The company posted reported EBIT of NZ$259 million as compared to NZ$26 million in the previous corresponding quarter, increased on account ofpositive one-off items include NZ$64 million from the gain on sale of foodspring™ and NZ$22 million from Beingmate revaluation. During Q1FY20, the business reported normalised gross margin at NZ$740 million as compared to NZ$646 million in the previous corresponding period. During the quarter, the company has launched a new partnership, Plant for Good, in order to help farmers with the on-farm native planting.

       
   Q1FY20 Operating Highlights (Source: Company Reports)

Guidance:As per the FY20 guidance, the company expects Farmgate Milk Price within the range to ~NZ$7.00 - ~NZ$7.60 from ~NZ$6.55 - ~NZ$7.55 per kgMS, aided by strong global demand and stable global milk supply. As far as risk is concerned, the company expects downside risk from a weakening renminbi, which tends to reduce Chinese consumer purchasing power for USD-priced dairy products.

Stock Recommendation:The stock of FSF is quoting at $3.80, with a market capitalization of $387.01 million. On the demand side, Global Dairy Trade prices have increased by about 6% since the previous forecast. Whole milk powder (WMP) prices, a key driver of the milk price, have hit their highest level since December 2016. The company witnessed exponential growth in its top-line and as well as in reported EBITDA in Q1FY20. Considering the aforesaid facts, we have valued the stock using one relative valuation method, i.e., price to earnings multiple and arrived at a target price, which offers an upside of lower double-digit (in % terms). Looking at the price movements, current trading levels, business prospects and decent FY20 guidance, we recommend a ‘Buy’ rating on the stock at the current market price of $3.800 as on 05 December 2019.

 
FSF Daily Technical Chart (Source: Thomson Reuters)

Ardent Leisure Group Limited

ALG Details

Reduction in Net Loss:Ardent Leisure Group Limited (ASX: ALG) is the owner and operator of theme parks and family entertainment centres. Recently, the company reported a change in Director’s interest, where one of the company’s Directors named Randy Garfield acquired 30,000 shares at a price consideration of $1.18 per share. 

FY19 Financial Highlights for the period ended 25 June 2019:ALG declared its FY19 financial reports wherein, the company reported revenue of $483.3 million, down 11.7% on y-o-y basis. The company reported a loss of $60.9 million as compared to a loss of $90.7 million in the previous financial year.Main Event accounted for over 85% of FY19 revenue and grew at 17% in Australian dollars after the impact of foreign exchange movements.

Theme park revenue came in at $67.1 million, improved 0.5% from FY18. It was added that group office corporate costs reduced as compared to the prior year, though FY19 was being impacted by around $5 million of the restructuring and other non-recurring items. Main Event was impacted by non-cash impairment charges for certain locations, restructuring costs and other non-recurring items in both financial periods. Attendance in FY19 was adversely impacted by the Coronial Inquest hearings held between June and December 2018, along with Sky Voyager not opening in Q4 as anticipated. 


FY19 Financial Highlights (Source: Company Reports)

Guidance:The business has updated the opening of four centres in FY20, including three in the new markets.The business is targeting to become a preferred tenant among many landlords. ALG stated that the stand-alone credit facility enhances the ability to grow as well as stand apart. 

Stock Recommendation: The stock of ALG is quoting at $1.185. The stock has generated a return of 18% and 0.85% in the last three-months and six-months, respectively. It was added that the restructuring which has already occurred, opening of Sky Voyager as well as other key projects which are planned for FY2020, should see Dreamworld experience growth in attendance and revenue during FY 2020. The company’s EV/Sales multiple stood at 1.2x on TTM basis, which is lower than the industry average of 3.7x. Its P/B multiple stood at 1.5x as compared to industry average of 2.5x. Considering the aforesaid facts, returns, product-pipeline, lower valuations and lowering net-losses, we recommend a ‘Buy’ rating on the stock at the current market price of $1.185, up 0.424% as on 05 December 2019.


ALG Daily Technical Chart (Source: Thomson Reuters)

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