Spark New Zealand Ltd
The company has just announced its results for FY 2015 and the brief details are as follows (all figures in NZ $). Operating revenues and other gains from continuing operations were down by 2.9% to $ 3.53 billion. EBITDA from continuing operations were up 2.8% to $ 962 million and net earnings for the year from continuing operations grew 16.1% to $ 375 million. Net earnings for the year from all operations were down by 18.5% to $ 375 million primarily because of the game from sale of AAPT in the previous year. Net earnings attributable to security holders were up 16.2% to $ 373 million. The final dividend was 11 cents per share and, added to the interim dividend of 9 cents per share, makes a total dividend of 20 cents per share representing an increase of 17.6% over the previous year.
SPK Daily Chart (source - Thomson Reuters)
Capital expenditure grew by 25.5% to $ 576 million though the increase was 8.9% to $ 418 million if spectrum is excluded. Mobile revenues grew by 4.4% to $ 1.02 billion and IT services revenue by 5.5% to $ 592 million. Mobile connections grew by 8.6% to 2.178 million and the headcount increased by 8.5% to 5092. Among the other accomplishments were the completion of the successful rebranding of Spark New Zealand. The sale of non-core assets was completed and this included Telecom Rentals, the international voice business and the 60% shareholding in Telecom Cook Islands. The Takakini Data Centre costing $ 61 million was opened and new businesses were launched such as Lightbox, Lightbox Sport, Qrious and Morepork.
Dividend Numbers (source - Thomson Reuters)
Net cash flows from operating activities came to $ 630 million though this was offset by outflows on investing activities of $ 456 million and on financing activities of $ 304 million. This led to a net decrease in cash of $ 128 million compared to a net increase of $ 92 million in the previous year.
SPK Group Highlights (Source - Company Reports)
The second stage of the re-engineering program has been delivered putting customers at the centre of IT systems and laying the foundation for digital capabilities and future improvements in productivity. The turnaround programme has been completed providing the headroom to be competitive on price and provide for careful investment in the growth areas of the future. The company is now nationwide on 4G and fibre supported by a core data transport network which runs the length and breadth of the country.
We believe that after one year of program implementation and the divestiture of non-core assets, we can get a much clearer picture of the company. We like the decision to divest non-core businesses and reinvest the capital in digital services such as the data centre and the IT services which are a much better fit with the core telecom businesses. The company has also been successful in increasing market share because its new Mobile connections totalling 172,000 is quite an achievement when you consider that the total population of New Zealand is only about 4.4 million. Despite the high dividend payout ratio, the company should have no problem maintaining its dividend in the future. We think that an investment in the stock can produce income as well as growth and have no hesitation in rating it as a Buy.
FlexiGroup Limited
The company reported results for FY 2015 showing 5% volume growth and 8% receivables growth resulting in a 6% increase in cash NPAT to $ 90.1 million while statutory NPAT grew from $ 57.6 million to $ 82.7 million. Volume grew from $ 1.08 billion to $ 1.13 billion and closing receivables stood at $ 1.428 billion compared to $ 1.318 billion in the previous year. The fully franked annual dividend grew from 16.5 cents per share to 17.75 cents per share resulting in a dividend yield of around 6.1% compared to 5.2% in the previous year. Cash earnings per share grew from 28 cents per share to 29.6 cents per share. The transformation of the profit pool continues with higher earnings from all segments compared to the previous year and the continuing investment programme is creating synergies across the entire business especially in digital technology. The company is transforming itself into a digital company with substantial improvements in the levels of service, the speed of origination and customer satisfaction resulting in repeat business value.
FXL Daily Chart (Source - Thomson Reuters)
The conversion ratio of total portfolio income to operating cash flow continues to be highly satisfactory at 36%. The company has provided cash NPAT guidance of $ 92 million-$ 94 million for FY 2016 and the rebuild of the Enterprise and SME businesses has had its impact on earnings growth for FY 2016. The higher depreciation charge of $ 2 million in FY 2016 compared to FY 2015 is because of the investment programme which started in FY 2014. The company currently provides a dividend yield of around 7% fully franked and dividends are expected to remain in the range of 50% to 60% of cash NPAT.
FXL Dividend Numbers (source - Thomson Reuters)
The group continues to follow a conservative funding strategy supported by multiple committed debt facilities, matched term and rate structures in respect of wholesale debt and an active presence in the debt capital markets. It has strong and stable relationships with five Australian financial institutions providing committed facilities on a revolving basis. It is achieved a material reduction in the cost of funds because of lower base swap rates and decreased credit margins on bank/securitisation facilities. The company has substantial unutilised committed revolving facilities so that growth in the foreseeable future can be funded even without resorting to receivables securitisation. Despite this, the company will continue to maintain its securitisation program to decrease cost of funds, improve the efficiency of capital and maintain the diversification of sources of funding.
FXL Group Highlights (Source - Company Reports)
Share prices are now recovering after the 18% crash in its stock prices when the markets reacted to its disappointing full-year profit guidance and within days of the chief executive Tarek Robbiati announcing his departure. However, we note that the company has managed to deliver a return on equity of 23% and believes that it still continues to be a fundamentally sound income stock. We think that the crash in prices has created a market opportunity for buying and rate the stock as a Buy.
DUET Group
The group presented its results for FY 2015 and there were several highlights. The two pipeline projects (WAWP and FRGP) were commissioned and the first full year earnings contribution will be made in FY 2016. The group is planning to build, own and operate the North-Eastern Gas Interconnector pipeline and submission is due on 30 September 2015. On the regulatory front, United Energy launched its EDPR submission for 2016 to 2020, DPB lodged the 2016-2020 Revised Access Agreement and Multinet Gas submitted an accelerated pipework pass-through application to the AER. As regards capital, a $ 1.67 billion underwritten placement and entitlement offer was completed in August 2015 and was strongly supported by both institutional and retail investors. A substantial shareholder notice (10.7%) was lodged by UniSuper on 7 August 2015. Over $ 2 billion worth of debt was raised and refinanced on competitive terms. In the area of distribution, the company delivered 17.5 cents per share in line with the guidance for FY 2015 and a final distribution of 8.75 cents per share was paid on 20 August 2015. The guidance for FY 2016 is 18 cents per share rising to 19 cents per share in FY 2018. This is subject to the completion of the proposed EDL acquisition and the assumptions for the forecast being met.
DUE Daily Chart (Source - Thomson Reuters)
Group consolidated results for the year show a 1.4% increase in revenues from ordinary activities to $ 1.26 billion, a decline of 2.1% in EBITDA to $ 783.5 million and a decline of 11.1% in NPAT to $ 77 million. Proportionate results show a 0.5% increase in total revenues to $ 854.7 million, a 1.1% decline in EBITDA to $ 610.6 billion and proportionate earnings up 9.5% to $ 210.9 million.
DUE Dividend Numbers (Source - ASX)
On 20th July, the group announced a proposal to acquire 100% of Energy Developments Ltd (EDL) an ASX listed company through a Scheme of Arrangement for $ 8 per share payable in cash. The implied EV multiple is 8.8 times the FY 2015 EBITDA of EDL. The company considers EDL to be a strong strategic fit because it generates long-term contracted energy infrastructure cash flows, diversifies the company's own cash flows, provides a complementary remote energy business as well as an attractive growth platform. It is expected to deliver immediate value to shareholders because it will be immediately cash flow accretive, and help the company in achieving its distribution guidance and growth started off 0.5 cents per share every year up to 2018. EDL continues to deliver strong financial performance and has announced a number of additional projects is the acquisition was announced. For FY 2015, it reported revenues of $ 448.7 million up 6.1% over the previous year and EBITDA of $ 218.2 million up 19.8% over the previous year.
EBITDA (Source - Company Reports)
In our opinion, the company will continue to offer dividend growth and possibly some capital appreciation which makes it an attractive stock. We would rate the stock as a Buy.
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