Stocks’ Details

ARB Corporation Limited

 
ARB Withdrew FY20 Guidance Amid COVID-19 Outbreak: ARB Corporation Limited (ASX: ARB) is engaged in manufacturing, distributing and selling of four-wheeler motor vehicle accessories and light metal engineering works. On 30 March 2020, the company withdrew its FY20 guidance, which was provided on 18 February 2019, due to the rising uncertainty of coronavirus outbreak. The rising government measures to shutdown businesses all over the world are gradually slowing economies across the globe. ARB is workingclosely with its employees, customers and suppliers to curb the effect of COVID-19 to ensure continuity of its business when market conditions improve. The company has also deferred the payment of its interim fully franked dividend of 18.5 cents per share, which was to be paid on 17 April 2020.
 
Other Recent Update: In a recent update, the company announced that Mitsubishi UFJ Financial Group, Inc., has become a substantial holder of the company, with a voting power of 5.05%.
 
Key Highlights of First-Half for the Period Ended 31 December 2019: The company had issued its results for the six months period and stated that it has achieved record NPAT amounting to $25.3 million, down 7.4% year over year. The company experienced a rise of 7.3% in its sales revenues, which came in at $233.4 million. EPS for the period stood at 31.71 cents, down from 34.4 cents per share reported in the year-ago period.
 

Key Financial Highlights (Source: Company Reports)
 
Valuation Methodology:P/E Multiple Based Relative Valuation
 

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of ARB closed at $13.85 with a market capitalization of ~$1.06 billion as on 30 March 2020. The stock is currently quoting at the lower band of its 52-week trading range of $10.4 to $20.64.The stock has generated negative returns 29.86% and 22.15% in the last three months and one year, respectively. We have valued the stock using P/E based relative valuation method, and for the purpose, we have taken peers such GUD Holdings Ltd (ASX: GUD), InvoCare Ltd (ASX: IVC), Austal Ltd (ASX: ASB), to name few, and arrived at a minor correction (in percentage terms). Therefore, considering the above factors, we have a watch stance on the stock at the current market price of $13.85 per share, up 4.528% on 30 March 2020.
 

SeaLink Travel Group Limited

 
Update on COVID-19 Impact on Tourism Related Services: SeaLink Travel Group Limited (ASX: SLK) is involved in offering tourism and transport services. Recently, the company stated that it will have no material operational limitations in providing its services due to the COVID-19 outbreak. SLK has ~85% of its current revenue being obtained from the long-term government contracted sources. Public transport, which is considered as an ‘essential service’, will continue to operate throughout the pandemic. For 2HFY20, the company had expected reduction in EBITDA of $5 million for the tourism and marine businesses, owing to the combined impact of bushfires and coronavirus outbreak. Given the ongoing uncertainty in the tourism market, the company withdrew its FY20 earnings guidance and will continue to monitor and assess the rising COVID-19 impact.
 
H1FY20 Financial Highlights for the Period ended 31 December 2019: The company reported operating revenue for the period at $132.9 million, an increase of 4.6% year over year, owing to robust growth in Captain Cook Cruises, NSW & WA businesses. Underlying NPAT stood at $13.6 million, up 3.8% year over year. Net operating cash inflow for the period stood at $25.2 million, as compared to $28.9 million in the prior corresponding period.
 

1HFY20 Financial Metrics (Source: Company Reports)
 
Valuation Methodology:P/E Multiple Based Relative Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock has a market capitalisation of $613.7 million. The company has a PE multiple of 17.9x, with an annual dividend yield of 5.34%. As per ASX, the stock of SLK is trading below the average of its 52-weeks low and high of $2.45 and $5.310, respectively, proffering a decent opportunity for accumulation. Going forward, the company expects to capitalise on Transit Systems Group integration opportunities. We have valued the stock using P/E based relative valuation approach and have arrived at a target price with an upside of lower double-digit (in percentage terms). For the purpose, we have taken peers like Corporate Travel Management Ltd (ASX: CTD), Experience Co Ltd (ASX: EXP) and Event Hospitality and Entertainment Ltd (ASX: EVT). Hence, we recommend a “Buy” rating on the stock at the current market price of $2.93, up by 4.27% on 30 March 2020.  
 

3P Learning Limited

 
3PL Rides on Improved product & Enhanced Customer Experience: 3P Learning Limited (ASX: 3PL) is engaged in developing, sales and marketing of online educational programs for schools and families. In a recent update, the company announced that National Nominees Ltd ACF Australian Ethical Investment Limited, a substantial holder of the company, has increased its voting power from 12.89% to 14%.
 
H1FY20 Financial Highlights for the Period ended 31 December 2019: The company reported revenue for the period at $23.1 million, down 4% year over year, after a reduction in other income due to the impact of AASB16 Leases. Licence revenue for the period went down by 2% and came in at $22.8 million, with Americas increasing 30%, which was fully offset by declines in APAC and EMEA regions. EBITDA stood at $3.5 million, down 49% year over year. Net loss after tax for the period stood at $1.9 million, as compared to NPAT of $2 million reported in the year-ago period. Cash balance at the end of the period stood at $12.5 million, up 24% year over year.
 

1HFY20 Financial Metrics (Source: Company Reports)
 
 FY20 Outlook: The company expects to witness retention improvements from improved product and enhanced customer experience. Further,the company expectsincreased licencesfrom new prospects outside Australia and New Zealand. The company further expects modest growth in license revenue and EBITDA for 2HFY20 as compared to 2HFY19.
 
Stock Recommendation: The stock has a market capitalisation of $108.8 million. The company has a PE multiple of 53.79x. As per ASX, the stock of 3PL is trading close to the average of its 52-weeks low and high of $0.6 and 1.10. The stock has generated negative returns 8.24% and 23.53% in the last three months and one year, respectively. On the valuation front, the stock is trading at an EV/EBITDA multiple of 6x as compared to the industry median of 8.1x on TTM (Trailing Twelve Months) basis. Considering the above factors, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.8, up by 2.564% on 30 March 2020.
 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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