Stocks’ Details

Smartgroup Corporation Limited

H1FY19 Revenue Performance Improved By 3% on pcp:Smartgroup Corporation Limited (ASX: SIQ) is involved in administration outsourcing services. The company recently announced that its director John Prendiville disposed 163,433 shares, sold by Luaga Pty Ltd at $10.94 per share and 64,469 shares by Point Capital Pty Ltd at $11.15 per share, taking the final holding to 655,000 ordinary shares. In another recent update, SIQ announced that Amanda Morgan has resigned as Company Secretary with effect from 16 August 2019. Jonathan Swain of Company Matters Pty Ltd has been appointed as Company Secretary, effective from August 19, 2019. Sophie MacIntosh, Chief Legal Officer will continue as Joint Company Secretary.

H1FY19 Key Highlights: Revenue for the period was reported at $125.8 million, an increase of 3% as compared to the previous corresponding period. This can be attributed primarily to a net c.5,000 growth in salary packages as well as a c.1,000 growth in the Novated Leasing (NL) carpark. NL settlements were relatively flat as compared to the prior year, despite a 9% year on year fall in new domestic private vehicle sales.

Profit after tax, as measured by NPATA, for the period was reported at $40.48 million, an increase of 5% as compared to the previous corresponding period. Net debt as on June 30, 2019 was reported at $32.5 million with net debt/last twelve months EBITDA of 0.27x against 0.13x as at 31 December 2018. The Board of Directors declared a fully franked interim dividend of 21.5 cents per share, representing an increase of 5% from the prior corresponding period, with a record date of 2 September 2019 and payment date of 16 September 2019, respectively.


H1FY19 Income Statement (Source: Company Reports)

What to expect: The company has now secured its 3^rd largest client until 2022. Around 180 clients now use SIQ’s two or more service offerings, delivering a growth of circa 20% over the last 12 months. It has entered into 7 new partnerships and signed 5 more in H1FY19. These developments are expected to help the company in delivering a sustainable value for its shareholders in the coming times.

Stock Recommendation: At thecurrent market price of $11.350, the stock is trading towards the higher end of its 52-week trading range of $7.079 - $12.666 and has generated a positive return of 18.25% in the last 1-month. Its gross margin, EBITDA margin and net margin for H1FY19 stood at 96.8%, 46.9% and 24.5%, better than the industry median of 39.0%, 20.2% and 11.3%, respectively, implying decent fundamentals of the company. ROE for H1FY19 at 10.9% was better than the industry median of 9.0%, indicating that the company generated better returns for its shareholders than its peer group. Hence, considering the decent performance in 1H19, further expansion of service offerings, integration of acquired businesses, strong cashflow generation, etc., we recommend a “Hold” rating on the stock at the current market price of $11.350, up 0.088% on August 29, 2019.
 

Virgin Australia Holdings Limited

Statutory Loss after Tax for FY19 was reported at $315.4 Mn:Virgin Australia Holdings Limited (ASX: VAH) is involved into airlines operations in Australia. The company recently announced about the appointment of new executive leadership team, simplified organisational structure and an organisational rightsizing program. The important designations in the new executive team includes Chief Financial Officer (Keith Neate), Chief Operations Officer (Stuart Aggs), Chief Commercial Officer (John MacLeod), Chief Experience Officer (Danielle Keighery), Chief Strategy & Technology Officer (‘vacant’), Chief Legal and Risk Officer (Dayna Field), Chief People & Culture Officer (Lucinda Gemmell), Chief Executive Officer (Karl Schuster, current CEO Velocity Frequent Flyer), and Company Secretary (Sharyn Page). These measures are expected to drive company’s greater business integration, customer focus and reduced costs.
FY19 Key Highlights:Group’s underlying loss before tax was reported at $71.2 million, reflecting the impact of adverse H2FY19 market conditions, new route investments, and $158.8 million in fuel and foreign exchange headwinds. Statutory loss after tax was reported at $315.4 million, which included non-cash impairment of Tigerair and VA International business units, derecognition of deferred tax assets, and restructure costs. Total Revenue for the period was reported at $5.8 billion, which was 7.6% up despite deterioration in revenue trading conditions in H2FY19. Company’s cash balance at the end of the period was reported at $1.7 billion, up by $324.5 million on FY18.


FY19 Key Metrics (Source: Company Reports)

What to expect:As per the release, the start of FY20 has seen a continuation of softer conditions experienced in H2FY19. The benefits of the business improvement initiatives will begin to be realised during FY20. The Group is focused on continued disciplined capacity and network management and expects capacity to further reduce in H1FY20. It also anticipates further headwinds related to fuel and foreign exchange of around $100.0 million in FY20 as compared to FY19.

Stock Recommendation:VAH’s share generated a negative YTD return of 16.22%. Its gross margin for FY19 stood at 54.2%, better than the industry median of 39.7%. However, its EBITDA margin and net margin for FY19 stood below the industry median of 19.2% and 4.2%, respectively. The stock is currently trading towards the lower end of its 52-week trading range of $0.150 - $0.250. Considering the FY19 performance, softer business environment, fuel cost and forex related headwinds along with weaker outlook, etc., we have a wait and watch stance on the stock at the current market price of $0.160, up 3.226% on August 29, 2019.

Bingo Industries Limited

BIN reported decent FY19 top-line performance:Bingo Industries Limited (ASX: BIN) is involved in providing waste management solutions for domestic and commercial businesses. The company recently announced that two of its directors Barry Buffier and Michael Coleman, acquired 20,000 shares and 15,000 ordinary shares for the consideration of $46,811.66 and $33,949.50, taking the final holdings to 80,000 ordinary shares and 202,272 ordinary shares, respectively, effective from August 23, 2019.

FY19 Key Highlights:Net revenue of the company recorded a growth of 32.4% to $402.2 million. Underlying EBITDA for the period grew by 13.2% to $106.1 million. Underlying EBITDA was in-line with guidance, comprising $92.5 million EBITDA from the BINGO business and $13.6 million EBITDA from Dial a Dump Industries (DADI).

The Board of Directors declared a (fully franked) final dividend of 2.0 cents per share to be paid to shareholders, with record date and payment date on August 29, 2019 and September 30, 2019, respectively. Together with the half year dividend of 1.72 cents paid in March 2019, this brings total dividend for the year at 3.72 cents per share.


FY19 Key Financial Metrics (Source: Company Reports)

What to expect: BIN completed transformational acquisition of DADI with integration well progressed. It is now on track to deliver annualised cost synergies of $15 million over two years from FY20. The Company’s network capacity target of 3.4 million tonnes per annum exceeded in FY19, following the completion of announced development program and acquisition of DADI. As per the release, network reconfiguration plan is progressing well and is expected to return $80 million through the sale of non-core assets and Banksmeadow in FY20.

The company is well-positioned for further growth in FY20 with a full year contribution from DADI, Patons Lane and West Melbourne. It is well focused on optimising the core, delivering organic growth and margin expansion over the next 12 months. FY20 guidance will be provided at BIN’s Annual General Meeting on November 13, 2019.

Stock Recommendation: BIN’s share has generated a positive YTD return of 23.29%. Top-line of the company delivered a decent growth over previous year, however, bottom-line disappointed due to an increase in tipping and transportation costs and employees benefit costs. BIN’s ongoing projects and endeavour to optimize its operation are expected to help the company to improve its bottom-line, going forward. Moreover, its gross margin and EBITDA margin for FY19 stood at 53.2% and 25.3%, better than the industry median of 38.6% and 22.4%, respectively, implying decent fundamentals for the company. Hence, considering the aforesaid facts and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $2.250 on August 29, 2019.


 
Comparative Price Chart (Source: Thomson Reuters)

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