Stocks’ Details

Propel Funeral Partners Limited

Synergistic Acquisitions to Derive Further Growth: Propel Funeral Partners Limited (ASX: PFP) offers death care related services in Australia and New Zealand. As a part of investment strategy, the company acquires assets which operate within the death care industry in Australia and New Zealand such as private funeral home operators, funeral-related properties and infrastructure, and cemeteries and crematoria. Propel was incorporated on 19 January 2017 and was admitted to the official list of the ASX on 23 November 2017. The company recently confirmed that it will announce its FY19 results on 26 August 2019.

Propel, on 01 May 2019, announced that it has completed the acquisition of Morleys Group, Waikanae Funeral Home and the Kaitawa Crematorium.As a consideration, PFP issued 344,828 ordinary shares to multiple vendors. The issued shares are pursuant to voluntary escrow arrangements for 3 years from the issued date.

FY19 First Half Results Highlights: Despite the below trend death volumes seen during the period, the Company reported resilient 1H19 numbers, beating the guidance. Top line for the period posted an exuberant growth of 20.9% to $47.1 million on the prior corresponding period. Average revenue per funeral at $5,549 posted a yoy growth of 2.2% with like for like average revenue per funeral growth of 3%, which is within the range of 2% - 4%. Operating EBITDA at $11.7 million witnessed a growth of 6.4% on pcp with operating NPAT growth of 1.3% (in-line with guidance) to $6.4 million. Balance sheet as on the end of 1H19, remained strong with cash conversion of ~93%, net cash of $10.3 million, and undrawn debt facility of $50 million.


Volume and Revenue Growth (Source: Company Reports)

Outlook and Stock Recommendation: The company is well placed to benefit from the acquisition made in FY18 and FY19. At the current market price of $3.190, the stock is trading at price to earnings multiple of 11.39x. The stock has risen ~30% in the last 6-months. Currently, the stock is trading close to a 52-week high level of $3.340. Hence, considering the inorganic growth through acquisition, expected higher funeral volume growth, strong financials despite the prevailed weakness in the industry, strong balance sheet, etc., we recommend to “Hold” the stock at the current market price of $3.190, down 1.238% as on 09 July 2019.
 

Transurban Group

Flourished Business with Current projects on Track: Transurban Group (ASX TCL) is an integrated transport company, engaged in the development, operation, maintenance and financing of toll road assets as well as management of associated customers and government relationships.

The company recently announced that its financing vehicle, Transurban Finance Company Pty Limited, had priced a private placement worth €350 million of senior secured 15-year notes (“Notes”) under its Euro Medium Term Note Programme. settlement for same was expected to take place on 03 July 2019. The received transaction amount will be deployed for general business purposes and to support the projects in the pipeline.
TCL announced an ordinary dividend of AUD 0.3000 on fully paid ordinary shares, which will be paid on August 9, 2019.

Quarter Update March 2019: The company saw a growth of 2.3% in ADT (Average Daily Traffic) in the March quarter. For Sydney, the New M4 tunnels in undergoing through final commissioning works and is expected to be operational in mid-2019.

Sydney ADT posted a growth of 2.1%to 813,000 trips with average workday traffic rising by 2.5%. Car traffic growth, out of total ADT stood at 2.3%. For Melbourne, West Gate Tunnel Project is in the process of tunnelling which is expected to start in mid-2019.

Melbourne ADT came up with a growth of 3.1% to 856,000 transactionsand average workday traffic increasing by 2.1%. With the completion of Gateway Upgrade North project in Brisbane, in the month of March 2019, all lines have been opened.
Despite the construction disruption, Brisbane ADT rose 1.1% to 400,000 trips. For North America, the 395 Express Lanes progressed further during the quarter with the completion of 55% and is expected to be operational in late 2019.
North America ADT grew by 2.9% to 136,000 trips.

 

March Quarter Update (Source: Company Reports)

Outlook and Recommendation: With demonstrated capability in delivering development projects as infrastructure owners and operators, the company enjoys significant upgrades or new assets completed alongside major contractors and state government partners since its inception. Successful delivery of projects, strong partnerships, operational excellence, sustainable business model, growing customer base augur well for the future growth of the business.

At the current market price of $15.180, the stock is trading towards its 52-week high of $15.580 with an annual dividend yield of 3.9% and higher PE multiple of 128.14x. The stock has gained ~31% on YTD basis. Hence, considering the aforesaid facts and prospects of the business, we recommend to “Hold” the stock at the current market price of $15.180, up 0.397% as on 09 July 2019.
 

Ramsay Health Care Limited

Capio Acquisition to Support the Earnings Growth:Ramsay Health Care Limited (ASX: RHC) is engaged in the healthcare business with 480 global facilities in eleven countries, employee strength of 77,000 and market capitalization of ~$14.55 billion. The company on 27 May 2019, communicated to the market that Bruce Soden will step down as Group Finance Director and CFO in 2H 2019. On 25 June 2019, the company appointed Ms. Henrietta Rowe as Group General Counsel and Company Secretary.

RHC announced an ordinary dividend of AUD 2.2931 per security on RHCPA - TRANS PREF 6-BBSW+ 4.85% PERP SUB RED T-10-10 with Ex and payment date of October 2, 2019 and October 21, 2019, respectively.

On 25 March 2019, the company updated that its French subsidiary, Ramsay Générale de Santé (RGdS), launched a EUR625 million renounceable rights issue,to refinance its purchase of Capio AB.

1HFY19 Performance: For the period, the Group revenue saw a growth of 14.9% to $5.1 billion (growth of 6.1%, ex Capio). Group EBITDA at $728.6 millionalso witnessed a higher pcp growth of 9.8% (Ex Capio EBITDA growth at 7.2%).  Group Core NPAT (Core Net Profit After Tax) at $290.8 million in 1H19 posted a rise of merely 1%. Excluding the acquisition of Capio, Core NPAT saw a growth of 1.8% to $293.2 million. Resulting Core earnings per share (EPS) was reported to 140.6 cents with yoy growth of 1.2%. Ex-Capio, Core EPSobserved the growth of 1.9% to 141.7 cents per share. Statutory NPAT stood at $270.1 million with yoy growth of 9.6%.

The company acquired Capio on 7 November 2018, and with the acquisition, Ramsay Générale de Santé (RGdS) posted an exuberant growth in terms of top-line and EBITDAR at 25.7% and 19.1%, respectively.


1H19 Performance (Source: Company Reports)

Outlook and Recommendation: The Management is of the view that 1H19 results are satisfactory, and the company is on track to meet the guidance for FY19. Synergies from the latest acquisition of Capio, recently announced tariff hike in France, RHC’s leadership position in Australia along with the diversified business portfolio lead the company towards a long-term growth path. With the expectation of unavailability of any unforeseen circumstances, the Management reaffirmed FY19 Core EPS growth of up to 2% (incl. Capio).

At the current market price of $72.500, the stock is available at the price to earnings multiple of 36.250x and trading towards the 52-week high price of $74.120. The stock has gained ~33% in the last 1-year. Hence, considering the aforesaid facts and business prospects, we recommend a “Hold” rating on the stock at the current market price of $72.500, up 0.708% as on 09 July 2019.


Comparative Price Chart (Source: Thomson Reuters)      

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