Stocks’ Details
 

Reliance Worldwide Corporation Ltd

Robust EBITDA Guidance & deleveraging Balance sheet: Reliance Worldwide Corporation Ltd (ASX: RWC) reaffirmed its FY19 EBITDA guidance in the range of $280-$290 Mn. Additionally, for H2 FY 2019, the higher EBITDA margins are expected to be in the range of circa 53%-55% on the back of the earnings contribution from John Guest, accumulation of synergy benefits & cyclical commodity costs which will help reduce the cost of goods sold (COGS). However, these EBITDA margins are vulnerable on account of non-occurrence of a freeze event in the USA. Hence, if the freeze happening does not take place in the Feb-March 2019, then the result could be negatively affected by between 1.5% and 3.0%.
For FY 2018, the EBITDA (before contribution from John Guest and transaction costs expensed) was clocked at $150.9 Mn, up by 25% for the year. This was on the back of the strong sales seen across the product segment, a better product mix, scalability and improvements in the procurement chain.

RWC’s FY 2018 Financial Performance (Source: Company reports)
On the analysis front, the company has deleveraged its balance sheet, as the debt-equity has reduced to 0.50x in FY 2018 from the levels of 1.32x reported in the FY2017. Moreover, the company delivered robust FY18 EBITDA margins of 17.6% depicting the efficiency gained through operational leverage. On the other hand, the group has recently announced that they will be announcing the results for the first half of FY19 ending 31 December 2018 on the 25 February 2019.
 
Meanwhile, the stock price has risen 13.36% in the last one month and is trading close to 52-week lower level. Hence, considering the company’s focus on deleveraging of the balance sheet and decent EBITDA margins for FY18, we reiterate our “Buy” rating on the stock at the current market price of $4.890 per share.
 

Bingo Industries Limited

Amply supported by organic & Inorganic growth: Bingo Industries Limited(ASX: BIN) has lately reported that its acquisition of DADI is a very significant milestone for the company. This purchase would act as an enabler for the company to compete against the national and international players across the industry. Moreover, it has provided an undertaking to the Australian Competition Commission (ACCC) to dispose off its waste processing facility located in Banksmeadow. This step is taken up in order to address ACCC concern about the Company’s purchase plan of Dial A Dump Industries (“DADI”).There are expectations that, by February 21, 2019, the final decision would be out.

What to Expect From BIN: As regards the outlook, Bingo Industries Limited had stated that the company seems to be performing in line with the stated guidance for FY 2019, with regards to growth in pro forma EBITDA (or earnings before interest, tax, depreciation and amortisation) of the underlying business ranging between 15-20%. Going forth, the firm’s growth momentum shall be aided by recent capital infusion towards the strategic assets.
 
Bingo Industries Limited happens to be in a robust position with regards to the margins. In FY 2018, the company posted net margins of 12.7% which reflects the rise of 3.2% on the YoY basis. In addition, the company’s net margin is also higher than the industry median of 11.5% which demonstrates that the company is efficient in converting the top line into the bottom line.


BIN’s FY18 Financial Highlights (Source: Company Reports)
 
Meanwhile, the stock price has risen 6.47% in the past one month as on February 12, 2019 and is trading below the average of 52 weeks high and low level of ~$2.49 with PE multiple of 21.40x. By considering decent fundamentals and current trading level, we maintain our “Speculative Buy” rating on the current trading price of A$2.190 per share (up by 2.336% as on 13 February 2019).
 

Beach Energy Limited

Seems Overvalued at this price point: Beach Energy Limited (ASX: BPT) has lately notified about the dividend declaration on its ordinary fully paid shares of AUD 0.010. The record date shall be February 28, 2019 and the payment date shall be March 29, 2019. These dividends shall be fully franked.

As per the half year report for the 2019 financial year, the sales revenue was up 147% on pcp & reached to $955 million.This rise was on the back of volumes expansion aided by Lattice acquisition. Also, higher oil and gas prices and a lower average A$/US$ exchange rate helped the cause.


1H FY19 NPAT Summary (Source: Company Reports)
 
What to Expect From BPT: As regards the outlook, the company has a clear strategy of increasing the shareholder’s value, along with the five-year targets of increasing the production to 30 – 36 MMboe (Million barrel of oil equivalent). As per the guidance for FY 19, the company aims to achieve production of 28 –29 MMboe. The underlying EBITDA is anticipated in the range of $1.25 –$1.35 billion. Also, the capital expenditure is expected to be in the range of $450-500 Mn.
 
On the valuation front, the company is trading at Price/Book multiple of 2.10x, while the industry median stood at 1.70x. Moreover, the company has provided a dividend yield of 1.30% while the industry concerned has a median dividend yield of 2.60%.

Meanwhile, the stock has fallen 12.44% on the past six months as at 12 February 2019 and now looks promising at current levels. In the last three months, the stock has fallen by about 2.31% and the volatile trend is continuing. Given the mix of scenario, we have a wait and watch view on the stock at the current market price of $1.780 (up 5.325% on 13 February 2019), as we await further growth catalysts that can reduce the prevailing volatility.

Stock Price Comparative Chart (Source: Thomson Reuters)   

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