Caltex Australia Limited (ASX: CTX)

Capital expenditure needs to be managed:Caltex Australia’s stock was down 1.4% on March 12, 2018, as the group traded ex-dividend. CTX lately appointed Mark Chellew as Company’s Non-Executive Director and he will take his responsibilities with effect from 2 April 2018. The Board determined that Mark is an independent director and will stand for election at the upcoming AGM which is scheduled for 10 May 2018. The stock has underperformed since its full-year results were released, but its guidance was marginally above what was expected. Its prudent capital allocation strategy helped Caltex to deliver “top-quartile returns”. The group declared a fully-franked dividend of 61 cents per share which will be paid on 6 April 2018. Caltex will spend up to $120 million to take control of the remaining franchise sites in its network. It is expected that through this initiative the remaining 433 franchise sites will be transferred under Caltex ownership by mid-2020. The Group has “no preferred outcome” as it focuses on examining the implications of the various alternatives in relation to tax, value leakage, credit rating and the company’s supply chain.  Meanwhile, Group’s total replacement cost operating profit climbed up by 18 per cent and amounted to $621 million in 2017 and it was primarily driven by a strong performance from Caltex sole remaining refinery which generated higher refiner margins. Caltex accelerated the roll out of its new pilot stores, The Foodary, and achieved an average uplift of 35 per cent in its non-food sales from 26 stores. However, given the trading scenario and few headwinds, the stock looks “Expensive” at the current market price of $32.90
 

Dividend Trend (Source: Company Reports)
 

Independence Group NL (ASX: IGO)

Focussed on better outcomes:Recently, Van Eck Associates Corporation became the substantial holder of the Independence Group NL by holding 29,532,586 shares with 5.03% of voting power. On the other hand, IGO has committed A$450 million for exploration in FY18. At Noval Mining Lease Exploration, initial work program got completed in late 2017 and disseminated while blebby sulphides got intersected in Phoenix intrusive. The next step is that it will undertake 3D seismic survey which is expected to be completed by mid-2018. Revenue and Other Income for 1H18 got increased by 59 per cent as compared to the corresponding period in the prior year. Only one lost time injury was reported in 1H18 with the current LTIFR rate of 2.09. Debt of A$29 million was repaid and net debt reduced to A$120 million as on 31 December 2017. The Board declared a fully franked interim dividend of 1 cent per share for the first half of 2018. The stock price rose by 28.72 per cent in the past six months and by 5.91 per cent in the past one month. The group traded ex-dividend on March 12, 2018, and as a result, the stock dropped by 2.9%. We give a “Hold” recommendation at the current market price of $4.70, in view of the group’s efforts and nickel market dynamics.
 

Share Price Performance (Source: Company Reports)

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