Stocks’ Details

Spark Infrastructure Group

Efficiency and Productivity Gains Supported SKI’s Distributions: Utilities group, Spark Infrastructure Group (ASX: SKI) had earlier published their results for the half year which ended June 30, 2018. The management of the company had stated that the fall in the operating costs with regards to Victoria Power Networks has helped the company in supporting the customers in terms of reliability as well as service at the lower costs.


SKI’s Victoria Power Networks (Source: Company Reports)

Additionally, the management of the company stated that, in New South Wales, renewable energy connections business of the TransGrid also witnessed the favourable momentum. However, the management is also optimistic about the outlook for this space.

Growth in Key Ratios: Spark Infrastructure Group had posted gross margins of 63% in half year which ended on June 30, 2018 which implies the rise on the YoY basis. During the same period of the previous year, the company’s gross margins were 59.9%. However, the company also witnessed the YoY growth in its EBITDA margin as well. In the half year ended June 30, 2018, the company’s EBITDA margin stood at 58.3% while in the same period of the previous year, the company posted EBITDA margin of 53.1%.

Distributions to Grow Moving Forward: In the release which demonstrated half year results ended June 2018, the management of Spark Infrastructure Group had stated that the FY 2018 would witness distributions amounting to 16.0 cents per share.This distribution reflects an increase (annual) of 4.9% as compared to FY 2017. Apart from this, throughout the deployments in 2018-19, the company has plans to manage the performance as well as organic growth.

Additionally, the company plans to remain committed towards the activities which are focusing towards driving efficiency as well as growth throughout portfolio.

Meanwhile, the rate of return instrument released by Australian Energy Regulator has not impacted the stock significantly. The 2018 ROR Instrument will apply to future regulatory revenue determinations for all regulated businesses over the next four years; and in this regard, SKI has certainty of cash flows in the short term from their existing regulatory determinations while next five-year regulatory determinations will see changes being applied from 1 July 2020 for SA Power Networks, from 1 January 2021 for Victoria Power Networks, and from 1 July 2023 for TransGrid.

Stock Analysis: On the daily chart of SKI, relative strength index or RSI has been applied and default values have been considered. As per the observation, the 14-day RSI is moving towards the oversold region. After 14-day RSI reaches the oversold region, it is expected to rebound thereby, creating bullish momentum. Moreover, the growth in the key ratios (as mentioned above) further strengthens the confidence in SKI.

Given the current scenario, we maintain our “Buy” rating on the stock at the current market price of A$2.250 per share.
 

Spark New Zealand Limited 

Connection growth in pay-monthly Supported SPK’s Performance: Telecom player, SparkNew Zealand Limited (ASX: SPK) is expanding its footprint in diverse segments, and has lately moved into sports content production. Meanwhile, its FY18 mobile revenues witnessed the rise of 6.9% on the YoY basis. Out of the total operating revenues, the contribution made from the mobile was of 35.1% which implies the rise of 2.7% YoY. The favourable momentum was witnessed because of 6.3% rise with respect to the pay-monthly connection as well as positive momentum in ARPU for HMB as well as prepaid pay-monthly.  

SPK’s Mobile Performance (Source: Company Reports)
The company posted NPAT (reported) or net profit after tax of $385 million, and this implies the fall of 7.9% on the YoY basis which was witnessed because of the implementation costs related to the Quantum programme. As per the FY 2018 results summary, the company has been maintaining its focus towards wireless as well as towards the activities which would help it becoming the lowest cost operator. However, the company has also been focusing towards the customers which are price sensitive.
Total Revenues to Rise in FY 2019: Spark New Zealand Limited happens to be in the robust position which could help the company in FY 2019. As demonstrated by the FY 2018 results summary, Spark New Zealand Limited is expected to generate total revenues in the range of $3,600- $3,670 million in FY 2019. During the same period, the company is expected to post EBITDA in the range of $1,025-$1,055 million.
Stock Analysis: On the daily chart of Spark New Zealand Limited, exponential moving average or EMA has been applied and default values have been considered. After careful observation, it was noticed that the stock price has crossed the EMA and has moved downwards. However, there are expectations that moving forward, the stock price would again cross the EMA and after this crossover, a bullish momentum would be witnessed.
As a result, we maintain our “Hold” rating on the stock at the current market price of A$3.980 per share, which is closer to the 52-week high level.
 

Crown Resorts Limited

Melbourne Operations Supported Crown in FY 2018: In FY 2018, Crown Resorts Limited (ASX: CWN) posted net profits amounting to $326.7 million (before the consideration of the significant items) thus, implying the growth of 5.8% on the YoY basis. This growth was supported by the robust momentum in the company’s Melbourne business.


Investment in Australian Resorts (Source: Company Reports)

The gaming and entertainment company had remained committed towards the development projects as well as operations which are located in the Australian region. It had also focused towards delivering the improved returns to the shareholders. In FY 2018, the company had managed to unload numerous assets like interest in the Ellerston as well as in CrownBet, its shares which were there in Caesars entertainment corporation as well as Alon Las Vegas land.
Robust Balance Sheet Position to Support Crown Moving Forward: As depicted by the annual report of Crown Resorts for FY 2018, the company happens to possess the robust balance sheet which bodes well for company when it comes to financing the development project pipeline in the Australia. It can be assumed that the company is very much inclined towards the risk management. 

Additionally, the company plans to work in such a way which could support it moving forward. The company plans to aim those areas which are focused on keeping the activities as well as strategies in accordance with the plan stated.

Stock Analysis: On the daily chart of Crown Resorts Limited, Moving Average Convergence Divergence or MACD has been applied and default values have been considered. As per the observation, the MACD line has crossed the signal line and is moving upwards which represents the bullish momentum. Therefore, there are expectations that the stock price might witness positive momentum moving forward.

As a result, we maintain our “Hold” rating on the stock at the current market price of A$11.780 per share.


Stock Price Comparative Chart (Source: Thomson Reuters)
  

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