Spark Infrastructure Group

Equity Interest fuels numbers: Spark Infrastructure Group (ASX: SKI) reported 1H FY18 revenue at $563.5 mn, an increase of 5.7% from the 1H FY17 revenue of $460.9 mn. Growth of 10.4% was witnessed in the EBITDA at $337.4 mn compared to $305.6 mn in 1H FY17. The major contribution to the earnings of Spark is made by its equity interest in four Australian electricity networks in Victoria, South Wales and South Australia. Unregulated revenue for Victoria Power Networks grew 45.9% to $26.4 mn in 1H FY2018. SA Power Networks also saw higher revenue generation by 2.8% to $398.1 mn in the first half of 2018. TransGrid however posted drop in the revenue by 1.0% to $362.4 mn in 1H FY18.


Financial Performance Snapshot (Source: Company Reports)

Unstable Regulatory environment: The legislation has passed RORG binding law into SA parliament. The uncertainty in the energy regulation space would have negative impact on costs to consumers. The current destabilizing situation is concerning but we hope that there would be more clarity over regulations and policies in the coming months. For FY 2018, the company is confident that despite the regulatory challenges, its aggregated proportional regulated electricity revenues would grow. SKI is on the right track to draw benefits from more demand for network connection, augmentation and interconnection.

Stock Performance: The stock registered a fall of 3.75% as it traded ex-dividend on September 04, 2018, and has posted year to date return of over -7%. There is still good opportunity in the stock and we recommend a ‘BUY’ at the current market price of $2.29.
 

Whitehaven Coal Ltd

Stock Price factors in Ex Dividend trading: Whitehaven Coal Ltd.’s (ASX: WHC) stock dropped 7.61% on the bourses as it traded ex-dividend on September 04, 2018 and further saw a plunge of 1.7% on September 05, 2018. The management has declared the dividend of AUD 0.27 cents per share with ex-date of 4^th September 2018 and payment date set for September 13, 2018. The company posted spectacular FY18 results last month with 30% jump in profit in NPAT at $525.6 mn compared to $405.4 mn in FY2017. Balance sheet of the company remained strong with net debt reduced to $270 mn from $311 mn. Increased revenue of the company reflected in the bottom-line items with diluted Earnings per share at 52.2 cents per share in FY18 compared to 40.7 cents per share in FY17. Vinva Investment Management has recently become the substantial stakeholder in the company with voting power surging to 5.01%.

Growth Opportunities: The prospects of some of the biggest economies such as India, Japan and China look bright. Whitehaven is focused on Asian region for growth as the growth in demand is led by the deployment of new coal fired generators.


Annual New Coal Fired Capacity (Source: Company Reports)

Stock Performance: The stock has generated YTD return of 14.54% and has been in the growth trajectory for quite some time now. After a long run-up, the stock might cool down a bit as seen lately. The stock is trading at its crucial support level of $4.6 and any further weakness would be key to watch. We have an ‘EXPENSIVE’ stance on WHC at the current market price of $4.65.
 

Fortescue Metals Group Ltd

Low Iron Ore Prices Cut Profit: Fortescue Metals Group Ltd. (ASX: FMG) has posted net profit after tax of US$1.1 bn and underlying EBITDA of US$3.2 bn in FY18. Revenue declined 18% to US$ 6,887 mn in FY18 compared to US$ 8,447 mn in FY17 as the average iron ore price dropped to US$44/dmt in FY18 from US$53/wmt in FY17. The Board has announced a final fully franked dividend of A$0.12 per share amounting to total full franked dividend for FY18 at A$0.23 per share, a 62% pay-out of full year net profit.


Performance Snapshot (Source: Company Reports)

Stock Performance: The stock has generated negative YTD return of 24.75%. Although it has dropped from the highs of $4.96 and has been in the downtrend from quite some time now, we believe that the stock may correct further from the current level. We have an ‘Expensive’ recommendation on the stock at the current market price of $3.6 (down 2.9% on September 05, 2018).

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.