Stocks’ Details

WorleyParsons Limited

Underlying NPATA for FY19 Increased by 43% On Previous Year:WorleyParsons Limited (ASX: WOR) is involved in providing engineering design and project delivery services and operates in the energy, chemicals and resources sector. On October 16, 2019, the company, through an announcement, confirmed that it has provided information about its operations to the Foreign Investment Review Board (FIRB), in the context of possible creeping acquisitions by its largest shareholder, Dar Group. The Board believes that increase in Dar’s shareholding in Worley by creeping acquisitions, is not in the best interest of shareholders. As per another update, company’s director Andrew Peter Wood acquired 135,854 ordinary shares, taking the final holding to 791,191 direct shares, 748,613 indirect shares, 235,555 performance rights, and 39,409 share price performance rights.

FY19 Highlights for the period ended June 30, 2019:Aggregated revenue increased by 36% to $6,439.1 million. Underlying EBITA increased by 32% to $412.8 million. Underlying net profit after tax excluding the post-tax impact of amortization of intangible assets acquired through business combinations (NPATA) increased by 43% to $259.8 million. The Board of Directors had declared a final dividend of 15 cps, unfranked, with record date and payment date on 28 August 2019 and 25 September 2019, respectively.


Revenue and EBITDA Growth Data (Source: Company Reports)

What to expect:The company has been seeing continued improvement in market conditions for the energy, chemicals and resources sectors. On ECR acquisition, the company has enhanced the diversity and resilience of its earnings, and expects realization of cost, margin and revenue synergies in FY20.

Stock Recommendation:WOR’s shares generated a positive YTD return of 15.52%. Its gross margin for FY19 stood at 8.0% better than the FY18 result of 7.9%. Its debt to equity multiple for FY19 stood at 0.35x, better than the FY18 result of 0.45x. Considering the above factors in conjunction with the current trading levels, we recommend a “Buy” rating on the stock at the current market price of $13.620, up 3.969% on October 16, 2019.
 

Beach Energy Limited

Positive Interception Results at Dombey-1 Well:Beach Energy Limited (ASX: BPT) is involved in oil & gas exploration and production. Recently, Cooper Energy (ASX: COE) informed the market that the Dombey- 1DW1 exploration well has encountered gas in the primary target Pretty Hill Formation. COE holds 30% interest in PEL 494, which is operated by Beach Energy and is situated in the Penola Trough, onshore Otway Basin, South Australia.


Dombey-1 Interim Results Summary (Source: Company Reports)

FY19 Key Highlights for the year ended June 30, 2019:Total revenue increased by 64% to $2,077.7 Mn. Net profit after tax attributable increased by 190% to $577.3 Mn. Underlying NPAT increased by 86% to $560 Mn. The Board of Directors declared a fully franked final dividend of 1 cps, with record date and payment date on August 30, 2019 and September 30, 2019, respectively.



BPT’s Asset Summary (Source: Company Reports)

FY20 Guidance:The company expects production for FY20 to be in the range of 27 - 29 MMboe. Underlying EBITDA is expected to be between $1.25 - $1.40 Bn. Guidance ranges for capital Expenditure and DD&A have been estimated at $750 – 850 Mn and $17-18 / boe, respectively.

Stock Recommendation:BPT’s shares generated a whopping YTD return of 81.40%. Its EBITDA margin and net margin for FY19 stood at 65.4% and 27.8%, better than the industry median of 37.6% and 16.7%, respectively. Its ROE for FY19 stood at 27.4%, better than the industry median of 13.2%. Considering the high returns on the stock, we are of the view that most of the positive factors have been discounted at the current levels and we would like to wait for further catalysts todrive and support the valuation.Given the backdrop of the above factors,we have a wait and watch stance on the stock at the current market price of $2.370, up 1.282% on 16 October 2019.
 

Carnarvon Petroleum Limited

Decent FY19 Cash and Cash Equivalent Position at $133,403,000:Carnarvon Petroleum Limited (ASX: CVN) is involved in oil and gas exploration, development and production. Recently, the company published its September’19 Quarter report, where it highlighted that its net cash outflow from the operating activities for the period was reported at $19,944,000. Net cash outflow from investing activities for the period was reported at $8,000 and cash inflow from financing activities for the period was reported at $78,420,000. Cash and cash equivalents at the end of the period was reported at $133,403,000.

FY19 Key Highlights for the period ended June 30, 2019:The group reported a loss after tax for the period at $8,021,000 as compared to profit of $1,425,000 in the previous period. During the financial year, the company successfully raised capital worth $47,467,000, through a placement to sophisticated and institutional investors. The proceeds would be helpful for the company in its appraisal and exploration activities, engineering and design work for Dorado and a new Seismic acquisition over the Dorado and Roc fields and over exploration prospects within the Bedout sub-basin.


FY19 Income Statement (Source: Company Reports)

What to Expect:The company has identified a late Permian carbonate reef oil prospect of significant size within the Condor project. It also aims to complete the front-end engineering and design (FEED) work for the liquids project in CY2020.

Stock Recommendation:CVN’s shares generated a positive YTD return of 24.24%. Its current ratio for FY19 stood at 34.66x, better than the industry median of 1.21x, which implies that the company is in the better position to address its short-term obligations. In FY19, the company made a significant progress towards redeveloping the Buffalo oil field. In addition, it progressed towards unlocking the potential suite of exploration assets across the North West Shelf. Therefore, we suggest investors to keep a close watch on how the above developments unfold in future performance. Given the backdrop of the above factors, we give a "Speculative Buy" on the stock at the current market price of $0.405, down 1.22% on October 16, 2019.

 
 Comparative Price Chart (Source: Thomson Reuters)

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