Stocks’ Details
 

Aristocrat Leisure Limited

A Look at FY19 Results:Aristocrat Leisure Limited (ASX: ALL) is engaged in designing, development, manufacturing and marketing of diverse range of products and services, which include electronic gaming machines, casino management systems and digital social games. The market capitalisation of the company stood at ~A$20.31 Bn as on 20^th November 2019. Recently, the company updated the market with its FY19 results for the period ended 30 September 2019. It reported a normalised profit after tax and before amortisation of acquired intangibles amounting to $894.4 million, reflecting a growth of 22.6% in reported terms and 13.9% in constant currency. The results were fueled by continued operational momentum throughout Land-based and Digital businesses, underpinned by currency and tax benefits.


Financial Performance (Source: Company Reports)

What to Expect:ALL anticipates the changes in its group structure to start generating non-Australian cash tax savings, which would further enhance ALL’s ability to invest in order to sustain its growth momentum and create value for the shareholders. The company also anticipates a moderate rise in SG&A throughout the business due to the investments in digital, data and transformation skillsets for growth.

Stock Recommendation:The company declared the final dividend amounting to 34.0 cps, fully franked, for the six months ended 30 September 2019. This brought the total dividend for FY19 to 56.0 cps, reflecting an increase of 21.7% or 10.0 cps against pcp. The stock of ALL has EV to sales multiple of 5.2x as compared to the industry median (Consumer Cyclicals) of 1.2x on TTM basis.  ALL has EV to EBITDA multiple of 14.7x against the industry median (Consumer Cyclicals) of 7.7x on TTM basis. The stock witnessed a rise of 16.57% in the span of six months and 51.00% on YTD basis. As per the ASX, the stock of ALL is trading close to its 52-week high of A$33.920. Therefore, considering the higher valuations than peer group, price movement and current trading levels, we have a watch stance on the stock at the current market price of A$33.710 per share, up 6.006% on 20^th November 2019 on account of the release of FY19 results.
 

Domino's Pizza Enterprises Limited

Change in Shareholding of MD:Domino's Pizza Enterprises Limited (ASX: DMP) operates retail food outlets and is also involved in the operation of franchise services. The market capitalisation of the company stood at A$4.46 Bn as on 20^th November 2019. The company updated that Managing Director, Mr Don Meij, has exercised 300,000 share options in DMP granted in 2015, vested on 1^st September 2018, and was subject to an escrow period expiredon 28 October 2019. When it comes to financial performance, it reported FY19 revenue at $1,435 Mn, reflecting a rise of 24.4%. Its underlying EBITDA and NPAT (After Minority interests) stood at $282.4 million and $141.2 million, respectively. The following picture provides an overview of network sales:


Network Sales (Source: Company Reports)

Future Aspects:As per the Annual Report 2019, the company intends for Domino’s Pizza Enterprises business in Europe to be the largest single driver of revenue in its business in upcoming years. For the upcoming 3 to 5 years, the company expects annual store growth in the range of 7% to 9% and annual same- store sales growth in the ambit of 3% to 6%.

Stock Recommendation:In Australia/New Zealand, for FY20, it is focusing on strengthening its barbell strategy, mainly for carry-out customers. On the valuation front, the stock of DMP is trading at a price to cash flow multiple of 23.0x as compared to the industry median (Consumer Cyclicals) of 8.5x on TTM basis. DMP is trading at a price to earnings multiple of 38.17x against the industry median (Consumer Cyclicals) of 12.7x on TTM basis. As per the ASX, the stock of DMP is trading towards its 52-week high of A$53.630 and has gained 23.50% in the last three months. Therefore, considering the stretched valuations and current trading levels, we have a watch view on the stock at the current market price of A$51.910 per share, up 0.367% on 20^th November 2019.

Webjet Limited

Chairman’s Address to Shareholders:Webjet Limited (ASX: WEB) provides a full range of online travel booking services for flights, hotels, car hire, cruises and tours. The company has a market capitalisation of ~A$1.69 Bn as on 20^th November 2019. Recently, the Chairman, Roger Sharp addressed the shareholders at its 2019 Annual General Meeting and stated that WEB, during FY19, continued to deliver decent results throughout all key metrics. Roger Sharp added that the customers made 5.5 million travel bookings with WEB throughout the globe during FY19, which helped the company to generate nearly $4bn in TTV. In just over six years since launch, WebBeds has now become the company’s largest business, via a mix of organic growth and acquisitions. The below picture provides an overview of WebBeds position by EBITDA:


WebBeds Position (Source: Company Reports)

Future Guidance:For FY20, WEB anticipates underlying EBITDA, which excludes one-off revenues and costs and the impact of AASB16, to be in the range of $157 million and $167 million. This reflects the growth of around 26%-34% as compared to FY19, and 16%-23% organic EBITDA growth after adjusting for the additional 5-month contribution from DOTW in 1H20.

Stock Recommendation:As WebBeds has been growing and gaining scale, the company continues to witness significant improvements in the EBITDA margins throughout the business and remains on track to deliver the profitability target of 8/4/4 by FY22. This would mean 8% Revenue/TTV margin and 4% costs/TTV margin, would deliver 4% EBITDA/TTV margin, that translates to 50% EBITDA margin. Notably, EBITDA margin and operating margin of the company stood at 34.0% and 23.8%, reflecting YoY growth of 23.2% and 16.1%, respectively. Net margin of WEB stood at 16.5% with a rise of 11.0% on a YoY basis. This implies that the company has improved its position to convert its top-line into the bottom-line. The stock generated returns of 16.48% in the span of one month and 17.47% on YTD basis. Therefore, in the light of respectable growth in key margins, decent outlook, and CAGR growth of 32.75% in total revenues over the period of FY15-FY19, we give a “Buy” recommendation on the stock at the current market price of A$12.880 per share, up 3.537% on 20^th November 2019, taking cues from its Annual General Meeting 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

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