CSR Ltd

CSR details
·         Disappointing results from Aluminium Division: CSR Ltd’s (ASX: CSR) stock plunged by 11.8% on May 10, 2017. CSR reported a revenue growth of 7% year on year (yoy) to $2.47 billion while posting net profit growth of 25% yoy at $177.9 million for full-year results. Net profit growth was driven by a substantial increase in earnings from building products as it has reported a record EBIT of 21% yoy at $202.8 million, led by the robust market for residential housing on the east coast of Australia.  Further, the growth in earnings led to a 5% yoy increase in operating cash flow to $264.8 million and an 11% increase in the full-year dividend to 26.0 cents per share. For FY18, company expects that earnings will be supported by reasonably steady demand from detached housing and high-rise construction on the east coast coupled with improvement in Viridian’s earnings due to restructuring initiatives to reduce costs in certain regions and growing position in higher-margin commercial projects. On the other hand, Aluminium segment reported EBIT fall of 10.5% to $93.1 million at the back of commodity price weakness.The result and outlook seem to be below market expectations and the stock also lost ground as CSR expressed about home building market reaching its peak.

·         Recommendation:We give an “Expensive” recommendation on the stock at the current market price of $ 4.56
 

Return on funds employed (Source: Company Reports) 

Quintis Ltd

QIN details
·         Board uninformed on major contract termination: Shares of sandalwood plantation company, Quintis Ltd (ASX: QIN) tumbled about 44.4% on May 10, 2017 after announcing that Santalis (wholly owned subsidiary of QIN) and Galderma had entered into an agreement in December 2016 that terminated Galderma’s licensing and supply arrangements with Santalis, with the termination effective from 1 January 2017. However, the company informed that prior to this advice to the board of Quintis on May 09, 2017, the fact and details of termination had not been provided to current board members and senior management. In other words, the board was not made aware of the termination of the agreement. This has come as a huge blow to the company and its shareholders. QIN is now taking strict measures to ensure no repetition of such communication breakdown. Recently, the group delivered good progress at Santalis regarding plantation put option extension and new China wood sales agreement while the group received the grant of an Australian patent relating to sandalwood oil compositions.

·         Recommendation:Given the current set of scenario and prevailing sentiments, we give a “Hold” recommendation on the stock at the current market price of $ 0.60

South32 Ltd

S32 details
·         Production at Illawarra revised to be 10% below prior guidance of 7.9Mt.: South32 Ltd (ASX: S32) stock plunged about 2.5% on May 10, 2017 as the group expressed that production at Illawarra Metallurgical Coal in FY17 is expected to be at least 10% below prior guidance of 7.9Mt. Recently, elevated gas concentrations were recorded at Appin area 7, and the company had informed the New South Wales Department of Planning and Environment (Resources Regulator) of the incident and a prohibition notice has been issued. As a result, production at the area 7 and Area 9 longwalls, which form part of the broader Illawarra Metallurgical Coal operation, has been suspended until the investigation into the incident is completed.Further, a revised production forecast for FY17 will be provided in due course, with the decrease expected to translate directly to sales given low inventory levels.

·         Recommendation:We give a “Hold” recommendation on the stock at the current market price of $ 2.66

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