Stocks’ Details

Noni B Limited

Robust Top-line Growth in 1H FY19: Noni B Limited (ASX: NBL) is one of the leading specialty retail groups in Australia. The revenue at $464.4 million witnessed a growth of 140.4% as compared to $193.2 million in 1HFY18 after the acquisition of 5 brands from Specialty Fashion Group.  The group delivered a de-growth of 3.1% in like-for-like sales for 1H FY19 as compared to de-growth of 5.0% announced to the end of October 2018. The cash flow remained strong with cash-on-hand of $64.7 million at the end of 1H FY19 against $34.1 million at the end of 1H FY18 (up 89.9%), giving a net cash position of $42.4m.



Management’s Guidance: Despite the markets to remain challenging, the management re-iterates EBITDA to be in line with market consensus of ~ $45 million for FY19. Themanagement in its AGM in November 2018 conveyed that the full year benefit of synergies will be visible in improved gross margin in FY20, resulting in EBITDA exceeding $75 million which is consistent with the market consensus.  

Stock Recommendation: Looking at the valuation perspective, the stock is trading at a price to book multiple of 2.3x as compared to 2.7x of the industry average. Looking at the price performance, the stock has gained 8.88% and 6.42% in last 1-year and 3-months respectively. Currently, the stock is trading close to its 52-week lower level of $2.210. During 1HFY19, the company reported a free cash flow of A$40.64 million with a favourable debt/equity ratio of 0.19x and RoE of 8.4%. At the current market price of $2.820, the annual dividend yield for the stock stands at 4.64% representing more income for its shareholders. Based on the foregoing and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $2.820 per share (up 0.714% on 30 April 2019).
 

Scentre Group

Operating Margin Above Industry Median: Scentre Group (ASX: SCG) is a stapled entityand owns shopping centres with long-term perspective across Australia and New Zealand.

Financial Performance in CY18: Net profit for SCG stood at $962.0 million comprising of net property income at $862.4 million, property revaluations at $581.5 million and net financing costs at $441.1 million in FY18. The net profit attributable to shareholders for FY18 came in at $953.3 million as compared to $1872.8 million, down ~49% (profit in FY17 was inflated due to one-off item – Property revaluation amount to $1,615.9 million). The aggregate distribution attributable to shareholders for FY18 was $358.4 million (6.74 cents per unit) with basic EPS (Earnings per Share) at 17.92 cents for FY18. 


Segment Income and Expenses (Source: Company Reports)

Operational Performance in FY18: Looking at the operational front, SCG’s portfolio was comprised of 41 centres in Australia and New Zealand, out of which 40 centres had joint interest with a combined value of $19.7 billion in FY18. Occupancy at 99.3% remains strong with net operating income growth at 2.5% on account of contracted rent escalations.

Buy-Back Program- The Group announced an on-market buy-back programme in April 2018, for up to $700 million to actively manage its capital structure. The Group bought back and cancelled 7,299,472 securities for $30,034,785.16 during FY18.

Dividend Distribution: The company has been a good dividend payer with a history of dividend pay-out ratio at 88.5%-94.8% since 1HCY15 till 1HCY18.


Dividend History (Source: Company Reports)

What to Expect: The Group commenced the NZ$790 million redevelopments of Westfield Newmarket in Auckland in FY18 which the management expects to be completed by the end of 2019.

Stock Recommendation: The company enjoys a higher operating margin at 74.5% in FY18 as compared to 64.1% of the industry median. At the current market price of $3.820, the annual dividend yield for the stock stands at 5.71% with reasonable PE multiple of 9.0x. Looking at the historical price movement, the stock has given a negative return of 3.72% and 4.43% in the last 1-year and 3-months respectively. Hence, considering the favourable outlook with decent fundamentals and strong dividend pay-out ratio, we give a “Buy” recommendation on the stock at the current market price of $3.820 per share (down 1.546% as on 30 April 2019).
 

Boral Limited

A Rise in Interim Dividend: Boral Limited (ASX: BLD) reported the net profit after tax before amortisation (or NPATA) & significant items amounting to $224 million for the half year ended December 31, 2018 which reflects a fall of 6% as compared to the first half of last year. However, the company’s statutory NPAT including significant items amounted to $237 million reflecting a rise of 37% on 1H FY2018. The company’s sales revenue amounted to $2.99 billion which implies a rise of 2% on 1H FY2018 which demonstrates a modest revenue lift in Boral North America as well as Boral Australia. Also, half year Headwaters synergies amounted to US$14 million against the full year target of US$25 million. The company’s interim dividend amounted to 13.0 cents per share which implies a rise of 4% on the interim dividend of the last year which reflects the company is having strong fundamentals. Also, the underlying activity in the key markets was solid.


1H FY 2019 Results Overview (Source: Company Reports)

What To Expect From BLD: With respect to Boral Australia, EBITDA in FY2019 is anticipated to be broadly similar to the prior year (excluding property). However, EBITDA growth of around 15% in the US dollars for the continuing operations is expected in FY 2019 in Boral North America. With respect to USG Boral, the company is working for strategic opportunities for USG Boral plasterboard business, but they have assumed that there will be no impact in FY2019. The franking rates for the dividends are anticipated to continue to be partially franked at or around 50%.

Stock Recommendation: The stock of BLD has delivered the return of 1.03% in the span of the previous three months while, in the past one month, it delivered a 7.19% return. The company is having an annual dividend yield of 5.49% which can be considered at respectable levels and is also higher than the industry average (Construction materials) of 4.8% which might attract the attention of market players. For FY 2019, with respect to dividend policy, the company stated that the pay-out ratio of approximately 50-70% of the earnings before significant items is expected, subject to the financial position of Boral. Hence, considering the above factors and current trading level, we give a “Buy” recommendation on the stock at the current price of A$4.850 per share (down 1.423% on 30 April 2019).


Comparative Price Chart (Source: Thomson Reuters)   

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