Stocks’ Details
 

Boral Limited

Sumitomo Mitsui Acquires 5.03% Voting Rights In BLD: Boral Limited (ASX: BLD) is involved in the manufacturing and supply of building and construction materials in the USA, Australia, and Asia. Today on August 9, 2019, the company announced that Sumitomo Mitsui Trust Holdings, Inc. and its subsidiaries became a substantial holder of the company with the voting power of 5.03%, effective from August 7, 2019. In another update, BLD announced that it has entered into a property development management deed with Mirvac in relation to its Scoresby site in Victoria.  Under the agreement, Mirvac will manage the urban development of the 171-hectare site over a multidecade period, including a proposed new housing community and substantial new parklands.\

H1FY19 Key Highlights: Its sales revenue for the period was reported at $2.99 Bn, which is 2% up as compared to the previous corresponding period, reflecting a modest revenue lift in Boral North America and Boral Australia. Its EBITDA before significant items was reported at $485 Mn as compared to $500 Mn last year, with $15 Mn year-on-year difference in EBITDA equivalent to the reduced earnings due to the divestments of Denver construction materials and US block.

 

BLD’s Key Performance Metrics (Source: Company Reports)

What to expect: Under Scoresby property agreement, Boral Limited expects to receive around $66 million of EBITDA till FY2026, including $3 million in FY19.Additional significant earnings are projected from the development of Scoresby from FY2027 till the anticipated project completion in 2035. Boral expects Scoresby to deliver in excess of $300 million of earnings over the life of the project, subject to rezoning, including removal of the existing Victorian State Government parks acquisition overlay, and market conditions over that period.

Stock Recommendation: Its current ratio for H1FY19 stood at 1.84x, better than the industry median of 1.38x, which implies the company is in a better position to address its short-term obligations. The stock of Boral Limited has delivered the returns of -7.13% in the span of previous one month while, in the time frame of past three months, the company’s stock posted the return of 5.61%. As per ASX, the stock is presently trading towards its 52-week lower level of $4.40, proffering a decent opportunity for accumulation. Hence, considering the aforesaid facts and current trading level, we recommend a “Buy” rating on the stock at the current market price of $5.080 per share (up 0.395% on August 9, 2019).

James Hardie Industries PLC

JHX Posted Improved Top-Line In Q1FY20 On PCP: James Hardie Industries PLC (ASX: JHX) is involved in the manufacturing of fiber cement siding and backerboard and a market leader in Europe for fiber gypsum products. The company recently published its June ’19 quarterly report where it highlighted that its net sales from ordinary activities for the period stood at US$656.8 Mn as compared to US$651.0 Mn in the previous corresponding period. Its profit from ordinary activities after tax attributable to shareholders decreased to US$86.5 Mn from US$90.6 Mn in the previous corresponding period.


June ’19 Quarter Performance Metrics (Source: Company Reports)

What to expect: Modest growth in the US housing market is expected in the fiscal year 2020. The Company expects new construction starts between approximately 1.2 million and 1.3 million. It also expects its North America Fiber Cement segment EBIT margin to be at the top of the range of 20% to 25% for the fiscal year 2020. This expectation is based upon the Company continuing to improve operating performance in its plants, improved net average sales price and mix, flattening of input costs and modest underlying housing growth.

Its full-year Adjusted net operating profit is expected to be in between US$325 million and US$365 million assuming, among other things, housing conditions in the United States remain consistent.

Stock Recommendation: Its ROE for FY19 stands at 60.8%, better than the industry median of 13.3%, which implies the company generated better return for its shareholder than its peer group. It is continuously improving its operating performance in its plant, which is expected to help the company is delivering a sustainable return to its shareholders in the long run. Coming to the stock’s past performance, it generated returns of 17.0% and 28.82% in the time span of one month and six months, respectively. Currently, the stock is trading slightly closer towards its 52-week high level of $23.90 with PE multiple of 29.55x. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $21.680 (up 14.045% on August 9, 2019, owing to the release of Q1FY20 results).
 

Orora Limited

H1FY19 Sales Increased By 9.9% On PCP: Orora Limited (ASX: ORA) is involved in providing an extensive range of tailored packaging and visual communications solutions. The company recently announced that it would recognise a significant item after tax expense of $55.8 million in the statutory financial results for the year ended June 30, 2019. This significant item expense after tax consists of $35 Mn provisions for additional decommissioning costs associated with the former Petrie Mill site and $20.8 million provisions for restructuring and impairment charges. In another update, Perpetual Limited and its related bodies corporate increased its voting power from 7.42% to 8.45%, effective from July 24, 2019.

H1FY19 Key Highlights: Its sales revenue increased by 9.9% on pcp to $2,306 Mn. Its underlying earnings per share for the period was reported at 9.4 cps, which is an increase of 6.8% as compared to the previous corresponding period. Its net debt on December 31, 2018 was reported at $872 Mn, as compared to $667 Mn in June 2018.
 

ORA’s Performance Overview (Source: Company Reports)

What to expect: Orora Limited expects to continue to drive organic growth, integrate recent North American acquisitions and invest in innovation and growth during FY19, with constant currency earnings anticipated to be higher than reported in FY18, subject to the global economic conditions.

Stock Recommendation: Its net margin for H1FY19 stood at 4.9%, which can be considered at decent levels. Also, the company’s ROE for H1FY19 stood at 6.9%, better than 6.5% in H1FY18, which implies the company is delivering a decent return to its shareholders. Thus, the improved return on equity on a YoY basis might attract the attention of the market players moving forward.ORA’s annual dividend yield stands at 4.04%. It is presently trading slightly below the average of 52 weeks high and 52 weeks low price of $3.72 and $2.86, respectively. Hence, considering the aforesaid facts and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $3.220 per share on August 9, 2019.

 
Comparative Price Chart (Source: Thomson Reuters)  

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