Stocks’ Details

Tabcorp Holdings Limited

Robust Fundamentals: Tabcorp Holdings Limited (ASX: TAH) provided the notification that relevant interest of Perpetual Limited and its related bodies corporate have gone down in Tabcorp Holdings Limited on 8 April 2019 to 8.10% of the issued fully paid ordinary capital, with a relevant interest in 163,603,570 ordinary shares. The Company's constitution, together with an agreement entered into with the State of Queensland, contain restrictions prohibiting an individual from having the voting power of over 10% in the Company.

Financial Performance:Therevenues from continuing operations came in at $2,787.4 million exhibiting a growth of more than 100%. The statutory Profits after tax for 1H FY19 came in at $182.5 million, recording an exponential growth of 642% (pcp), positively impacted by the full period contribution from the Tatts Group. The company’sEPS turned higher in 1HFY19 with 9.1 cents per share from 2.6 cents per share (pcp). The lower EPS in 1HFY18 was impacted by the discontinued Sun Bets operations. TAH had announced a fully franked interim dividend of 11.0 cents/share, which was paid on 13 March 2019. Target for dividend payout ratio in FY19 stands at 100% of NPAT before significant items, amortisation of the Victorian wagering and betting licence, and purchase price accounting. The company has witnessed a good dividend history.
 

Dividend History (Source: ASX)

Stock Recommendation:At CMP of $4.810 per share, the stock is available at P/E of 56.90x with the market cap at ~$9.65 billion. The annual dividend yield for the stock comes in at 4.39% which can be considered at the decent levels and can attract the interest of market players. The stock is trading slightly towards the 52-week higher price of $4.990. Analysing the price performance, stock has gained 10.14% and 12.74% in last 1-year and YTD basis, respectively. However, in the past 5 days, the stock has fallen -1.44% which reflects that the stock is quite volatile. Comparing the price to book multiple, the stock is trading at 1.3x of its book value, lower as compared to the Hotel & Entertainment Services’ Industry median at 1.8x, which keeps the stock in the attractive zone.  Hence, considering the robust fundamentals and current trading level, we give a “Buy” recommendation on the stock at the current market price of $4.810 per share.
 

Super Retail Group Limited

ROE And EBITDA Margins, Well Above The Industry Median:Super Retail Group Limited (ASX: SUL) informed that voting power of UBS Group AG and its related bodies corporate has gone down to 6.54% from 7.67%.

Financial Performance in 1H FY19: Thesales for the period went up by 6% to $1,403.2 million as compared to $1,323.7 million in 1H FY18.  PAT attributable to Owners of SUL was at $71.7 million against $72.2 million in 1H FY18, a decrease of 0.7%. The group completed a comprehensive review of employment arrangements across the business during this period and found out an underpayment of overtime and some allowances to retail managers. An estimate has been completed for the period between financial years 2013 to 2018 totalling $30.0 million after tax. The operating cash flow stood at $235.4 million which was higher than Group Segment EBITDA, representing strong cash conversion. The closing net debt on balance sheet for the period at $294.0 million was $94.8 million higher than pcp on account of $133.8 million related to acquisition of Macpac which was partially offset by positive cash flows.


Group Results (Source: Company Reports)
 
 

	SUL on 13 Feb 2019 declared a dividend of 21.5 cents fully franked which was paid on 28 March 2019. Annual dividend yield for the stocks at CMP of $8.260 stands at 5.95%.
Dividend History (Source: ASX)

Stock Recommendation: At CMP of $8.260, the stock is trading at price to earnings multiple of 12.720x with the market capitalisation of $1.62 billion. Looking at the price performance, stock has appreciated 14.94% and 24.13% in last 1-year and 3-months, respectively.EBITDA margins at 11.8% in 1H FY19 is well-above the industry median of 9.3%.

ROE in 1H FY19 at 9.1% is stronger than the industry median of 6.6% witnessing the strength to reward its investors.

Comparing the price to book value multiple, the stock is trading at 2.0x of its book value against Specialty Retailers’ industry average of 2.7x. Considering the attractive valuations and strong financial profile, we unchanged our rating and remain “Buy” recommendation on the stock at the current market price of $8.260 per share (up 0.365% on 17 April 2019).
 
 

Transurban Group Limited

TCL Trading At Higher P/E As Compared To Industry:Transurban Group (ASX: TCL) released its March quarter 2019 update mentioning that Average Daily Traffic (ADT) saw a growth of 2.3% on the back of growth seen across all markets.Opening of the New M4 tunnels in Sydney is scheduled for mid-2019. Sydney ADT went up by 2.1% to 813,000 trips and average workday traffic rose by 2.5%.

Melbourne ADT rose by 3.1% to 856,000 transactions.However, Brisbane ADT rose by 1.1% to 400,000 trips, despite the impact from construction disruption. 395 Express Lanes in North America continued to progress with the project now over 55% complete and expected to open late 2019.

TCL earlier announced that Transurban Queensland (“TQ”), in which it has a 62.5% stake, has priced ~ A$875 million senior secured notes (“Notes”) in the US private placement market. The notes will be issued in 3 tranches of ~ A$235 million, A$345 million, and A$295 million, with tenures of ten, twelve, and fifteen years, respectively. Proceeds in US$ will be swapped into A$. Interest rate exposure will be fully hedged for the term of the Notes. The proceeds of the notes will be used to repay existing bank liability and for general corporate purposes.

Financial Performance in 1H FY19: Statutory Toll revenue for the period witnessed 15% growth to $1,298 million driven by traffic growth across the Australian and North American networks.Statutory EBITDA was higher at $971 million with a YoY growth of ~14% but $74 million was impacted from A25 and consolidation of M5 West.


Financial Results (Source: Company Reports)

What to Expect: Management reaffirms FY19 distribution guidance at 59.0 cps with Mid-single digit distribution percentage growth in FY20.Management expects 5 projects to be completed by FY21 and further 4 by FY24. Moreover, ROE for TCL at 1.7% in 1H FY19 is significantly lower than the industry median of 5.4%.

Stock Recommendation: Annual dividend yield of the stock currently stands at 4.28% with the market capitalization of $35.63 billion. Meanwhile, the stock has risen 23.93% in the past six months and is trading close to its 52-week higher level. Moreover, the stock is currently available at price to earnings multiple of 112.880x, highest as compared to its peer group – BXB (21.12x), SYD (45.07x), CIM (20.04x). Hence, considering aforesaid parameters and current trading level, we maintain our “Hold” recommendation on the stock at the current market price of $13.140 per share (down 1.351% on 17 April 2019).


Comparative Price Chart (Source: Thomson Reuters) 

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