Stocks’ Details
 

Tabcorp Holdings Limited

 
Update on COVID-19 Impact: Tabcorp Holdings Limited (ASX: TAH) is engaged in the provision of gambling and other entertainment services. The market capitalisation of Tabcorp stood at $5.49 Bn as on 7 April 2020. Recently, the company took necessary measure to curb the spread of COVID-19 virus. In doing so, it has shut down its Australian licensed venues (hotels and clubs) and TAB agencies. Further, TAH has also deferred all major sports events around the world. However, the company’s Lotteries & Keno and Wagering & Media digital channels will continue to operate. It is to be noted that the company has temporary layoff of more than 700 of its employees till 30 June 2020 as a result of COVID-19 impact. Further, the company intends to reduce c.40% or ~160 in the number of technology contractors.
 
Other Recent Updates:In another update, the company stated that it is withdrawing its FY20 and FY21 outlook amid the rising uncertainty due to coronavirus outbreak. Further, the companyis taking important steps to reduce operating and capital expenditure wherever possible and persuade retail customers to shift to digital alternatives and aggressively support remaining accessible products.
 
1HFY20 Key Highlights for the Period ended 31^st December 2019: The company experienced a solid result in 1HFY20, which was bolstered by diversified businesses of the Group.Its revenue grew by 4.4% on year over year basis and stood at $2,913.9 million. EBITDA for the period came in at $596.5 million, up 2.1% year over year. Net profit for the period came in at $213.5 million, up 2.9% year over year. The company declared a fully franked interim dividend of 11 cents per share for 1HFY20.
 
 

Group Results (Source: Company Reports)
 
Valuation Methodology: P/CF Multiple Based Relative Valuation

P/CF Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of TAH made a 52-week low and high of $2.090 and $4.980 and is currently trading at the lower band of the range. The stock has corrected ~40.4% and ~44.33% in the last three months and six months, respectively. The company remains on track to make higher investments in personalisation, product innovation, digital capability along with retail modernisation. We have valued the stock using P/CF based relative valuation approach and, for the purpose, we have taken peers such as Aristocrat Leisure Ltd (ASX: ALL), Crown Resorts Ltd (ASX: CWN), Skycity Entertainment Group Ltd (ASX: SKC), to name few. As a result, we have arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, taking into consideration the decent growth in 1HFY20 and current trading level, we give a “Buy” recommendation on the stock at the current market price of $2.77 per share, up by 2.593% on 7 April 2020.
 

Origin Energy Limited

 
ORG Inks Deal with Falcon Oil and Gas: Origin Energy Limited (ASX: ORG) is involved in the production & exploration of natural gas. On 7 April 2020, the company entered into partnership agreement with Falcon Oil and Gas to raise its interest in the Beetaloo Basin joint venture by 7.5% in exchange for growing its carry of Falcon’s share of costs by $25 million in the coming years. However, earlier ORG stated a temporarily pause in the forward operations in the Beetaloo, due to COVID-19 pandemic.
 
COVID-19 Update: In response to the COVID-19 pandemic, ORG took necessary steps to maintain energy supply and provided support to customers who have been financially affected. In doing so, the company will not cut off any residential or small business customers till 31 July 2020. Further, due to coronavirus and a substantial reduction in oil prices, the company provided the following financial updates. For FY20, underlying EBITDA outlook is maintained in the range of $1.4 - $1.5 billion. Cash distributions from APLNG also remains unchanged at $1.1 - $1.3 billion for FY20. However, the company lowered capital expenditure by 5-10% in FY20 and aims to pursue cost reduction initiatives in FY21.
 
A Look at Business Performance in H1FY20: During the period, statutory profit decreased 25% year over year and came in at $599 million. Underlying ROCE stood at 8.3%, with free cash flow amounting to $680 million.
 

 
Valuation Methodology: P/E Multiple Based Relative Valuation

P/E Multiple Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock is trading near to its 52 weeks low price of $3.750, offering investors a decent opportunity for accumulation. The stock has corrected ~42.31% and ~36.46% in the last three months and six months, respectively.  The company remains on track to improve its retail business, by enhancing the customer experience and growing new revenue streams. We have valued the stock using a P/E Multiple based relative valuation method and arrived at a target price of lower double-digit growth (in % terms). For the said purpose, we have taken peers like AGL Energy Ltd (ASX: AGL), Santos Ltd (ASX: STO) and Oil Search Ltd (ASX: OSH). Considering the aforesaid facts, H1FY20 performance, balanced outlook amid covid-19 crisis, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $4.88, down 1.414% on 7 April 2020.
 

Computershare Limited

 
FY20 Guidance Revised: Computershare Limited (ASX: CPU) is engaged in the provision of investor services, employee share plan services, business services and communication services. In a recent announcement, the company stated that Lazard Asset Management Pacific Co, has become a substantial holder of the company, with a voting power of 5.23%.
 
1HFY20 Key Highlights for the Period Ended 31st December 2019: The company reported revenue of US$1,141.7 million, up 1.2% year over year. EBITDA increased 2.2% and came in at US$338.7 million. EPS for the period stood at 29.12 cents, down 16.7% on pcp. In 1HFY20, recurring revenues went up by 2.6% and represented 78.3% of the company’s total revenues. Notably, recurring revenue more than offset the decline in event-based revenues.
 
 

1HFY20 Results Summary (Source: Company Reports)
 
Guidance Update: The company notified that due to COVID-19 impact and volatility of financial markets, the company revised its guidance for FY20. Margin income revenue is expected to be ~US$180 million in FY20, down from the previous guidance of US$185 million. Management EPS which was earlier expected to go down by ~15%, will now be down by around 20% in FY20 in comparison to FY19. For FY21, the company is expecting to report margin income of US$100 million, down from US$115 million as per the previous guidance.
 
Valuation Methodology: P/E Multiple Based Relative Valuation

P/E Multiple Based Valuation (Source: Thomson Reuters), *1 USD=1.62 AUD
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of the company corrected by ~35.25% in the last six month and is currently trading close to its 52-week low level of A$8.270. The market capitalisation of CPU stood at A$5.5 Bn as on 7 April 2020. The company is focused on executing its long-term strategies to build a strong position against competitors. We have valued the stock using price to earnings based valuation method and arrived at a target price with lower double-digit upside (in percentage terms). For the said purpose, we have considered peers like Link Administration Holdings Ltd (ASX: LNK), AMP Ltd (ASX: AMP), Perpetual Ltd (ASX: PPT), etc. Hence, we give a “Hold” recommendation on the stock at the current market price of A$10.99, up 8.169% on 7^th April 2020, owing to the release of revised guidance. 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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