Healthscope Ltd

HSO Details

Challenges from subdued growth in core business and margin pressure: While Healthscope Ltd.’s (ASX: HSO) is trading at low levels relative to industry average, the group has been facing many headwinds since last year. For FY17, Healthscope reported a revenue growth of 3.8% to $2.32 billion and operating EBITDA growth of 3.5% at $411.4 million. However, statutory NPAT for the period was down 38.8% to $110.9 million (FY16: $181.1 million), adversely impacted by an impairment loss of $54.7 million related to the sale of the Group’s standalone Medical Centres and non-operating expenses after tax of $17.4 million. Further, depreciation and interest have increased as hospital expansion program is delivered. The Hospitals division is the major contributor to Group earnings, representing approximately 82% of Group Operating EBITDA in FY17 and delivered revenue of $2,014.0 million, up 3.4%, and Operating EBITDA of $359.4 million, up 1.3% due to softer private hospital market conditions and variability in patient case mix, combined with margin pressure, where costs have increased greater than health fund price increases in some areas of the business. Further, the performance of Victorian portfolio was impacted by several business challenges.
 

Group results – continuing operations; (Source: Company reports)

However, major hospital expansion projects delivered positive results by recording revenue growth of 8.4% over the prior year, outperforming the rest of the portfolio and the broader Australian private hospital market. On the other hand, New Zealand Pathology division delivered another strong result as the veterinary and analytical businesses contributed to growth in revenue. Nonetheless, the stock declined 23.5% in the past four weeks (as at September 18, 2017), owing to subdued growth in core business and margin pressure.We give a “Hold” recommendation at the current price of $ 1.65

Freelancer Ltd

FLN Details

Weak results for H1FY17:Freelancer Ltd (ASX: FLN) has been on a downswing since the group reported its H1 FY17 result. FLN’s reported net revenue of $26.3 million was flat on the prior corresponding period (1H16: $26.2 million). Notably, the Gross Payment Volumes (unaudited) declined by 18% yoy led by a decline in volume in the Escrow.com payments segment. Accordingly, Gross profit was $22.5 million, flat on the prior corresponding period (1H16: $22.7 million), with a gross margin of 85%, slightly down on prior corresponding periods due to the Escrow.com business having a naturally slightly higher cost of sales.

Average completed project value; (Source: Company reports)
 
On the expenses side, total operating expenses slightly decreased to $23.2 million (1H16: $23.5 million), driven by reaching scale in employment costs as the business demonstrates operating leverage headcount in engineering, support and functional areas. The Group reported an operating net loss after tax of $0.5 million (1H16: $0.1 million) and an operating EBITDA loss of $0.2 million (1H16: $0.09 million). Further, operating cash flow declined 66% yoy to $1.5 million (1H16: $4.5 million). Given the above scenario, the stock has fallen about 54% this year to date (as at September 18, 2017). On the other hand, factors such as growth in mobile, contests, and desktop traffic, healthy project fees, resolution of desktop funnel issues, and ability to change global marketplace dynamics, have enabled FLN to give a positive FY17 outlook. We give a “Hold” recommendation on the stock at the current market price of $ 0.46

Liquefied Natural Gas Ltd

LNG Details

Impact from liquidity management plan: Liquefied Natural Gas Ltd (ASX: LNG) witnessed a stock price fall of 23% over last three months (as at September 18, 2017) owing to volatile environment and weak sentiments. For FY17, the group posted net loss after income tax at $29.3 million compared with a loss of $115.2 million in FY16. The 2017 fiscal loss included the project development costs of $12.4 million, $2.5 million of share-based payment expenses, and $13.6 million in administration, corporate, and compliance costs in the period. Further, the decreasing loss from ordinary activities and the net loss for the period reflect the impact of the Company’s liquidity management plan. As at 30 June 2017, the LNG Group had $40.3 million (cash and cash equivalents) plus $4.2 million of other financial assets. During the financial year, net assets of the company and its controlled entities (the LNG Group) decreased by $26.6 million, from $81.0 million as at July 1, 2016 to $54.4 million as at June 30, 2017, primarily reflecting the slowing of the Company’s development activities as it works to procure offtake sales. 


FY17 results; (Source: Company reports)

Currently, LNG is developing LNG export terminal projects in the United States, Canada, and Australia having combined aggregate design production capacity of nearly 20 mtpa, with a further expansion option of up to 4 mtpa in Canada to create substantial shareholder value through successful execution of its ‘Energy Link’ strategy, distinguishing LNG as a pure LNG infrastructure investment opportunity. This entails developing mid-scale, low cost, efficient and reliable LNG liquefaction terminals to serve the international energy market’s demand for natural gas. Given the ongoing development of terminal projects,we give a “Hold” recommendation on the stock at the current market price of $ 0.45

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