2 Stocks Under Growth Radar – ALL, TWE

Aristocrat Leisure Limited

Opportunities in Digital Gaming Space- A Growth Catalyst: Aristocrat leisure limited (ASX: ALL) has, via a recent release, announced that the company’s revenue for the FY ended on 30 September 2018 came in at $3.62 Bn, up by 46.1% (YoY) in constant currency terms. The company’s ARR (annualized recurring revenue) comprises almost two-thirds of total Group revenues.

The company maintained strong EBITDA margins of 37.2% in FY18 which is higher than the industry median of 21.0%. These robust margins were realized on the back of expansion in the land-based margins which were offset by the lower margin digital acquisition business vertical.


 
ALL’s Financial Snapshots (Source: Company Reports)
 What to Expect Moving Forward: Going further, regarding its land-based outright sales, the company expects to maintain its market leading positions in the key markets and also anticipate the incremental gains in the North American adjacencies. On the digital front, the company expects growth in the bookings driven by new game releases along with an emphatic rise in the user acquisition costs.

Also, the company expects that the earnings for FY 2019 to be skewed towards the second half in consonance with the timings of digital game releases. On the financial metrics front, the company has a pre-tax margin of 21.5% as compared to the Industry median of 15.1%.This parameter suggests that it is a growth stock as it is growing at a much better pace as compared to the concerned industry.

Meanwhile, the stock price has fallen by 25.51% in the past six months as on 15 January 2019and is trading at PE multiple of 27.48x.Although the company has gained decent returns in the past three months and generated value for the investors, but we presume that the current price might have priced in all the recent positive developments. Hence, we have a wait and watch view on the stock at the current market price of $23.90.
 

Treasury Wine Estates Limited

TWE Regarded as Category-Value-Driver: For the FY 2018, Treasury Wine Estates Limited (ASX: TWE)clocked a normalized EBITS of $530.20 Mn, up by 17% on a YoY basis. This resulted into an EBITS margin of 21.80% for the FY 2018. This growth in margins is due to the fact that, in the regions of Australia, Asia & Europe the company considered a category-value-driver & not a volume driver. This was due to the strong brand portfolio, collaborative business planning & well-executed marketing plans as well as outstanding execution in-store.


TWE’s Financial Highlights (Source: Company Reports)
 
Understanding FY2019 Guidance: Treasury wine estates limited (ASX: TWE) has recently via a release stated that it will declare its results for the 1H of fiscal 2019 on the 14th of February 2019. The release said that the management is pretty elevated with the operational performance across all the regions and also said that the performance will exceed the earlier guided EBITS of $332 Mn and is expected to be in the range of $335-340 Mn in FY19. Moreover, the company remained firm over its earlier mentioned 25% EBITS growth for fiscal 2019.

On the financial metrics front, the company has a pre-tax margin of 19% as compared to the Industry median of 11.60%. This parameter suggests that it is a growth stock as it is growing at a much better pace as compared to the concerned industry. Meanwhile, the stock price has fallen 17.37% in the past six months as on 15 January 2019 and is trading at PE multiple of 29.30x. Given the backdrop of mixed scenario, we, therefore, recommend the investors to keep a watch on the stock and wait for upcoming 1HFY19 earning release which will be published on February 14, 2019.
 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.