Stocks’ Details

Premier Investments Limited

LFL Sales up by 4.6% on 1H18: Premier Investments Limited (ASX: PMV) was established as an investment vehicle to maximise growth in capital returns to shareholders through the acquisition of controlling or strategic shareholdings in premier Australian companies with a focus on retailing, importing and distributing.

Due to the continued strength of the Premier balance sheet and the strong performance of Premier Retail, the company announced interim dividends of AUD 0.330 to be paid on June 14, 2019.The ex-date and the record date for the dividend are May 30, 2019, and May 31, 2019, respectively.


Summarized Consolidated Statements (Source: Company Reports)

Total sales are up by 8.0% to a record $680.2 million during the period of 1H19, driven by Apparel Brands delivering strong sales growth in 1H19 with sales up 7.5% and online sales of $75.7 million up by 35.2% on 1H18. Among the key ratios, the ROE and pre-tax ROA stood at 6.5% and 6.9% for the reported period which implies an increase by 610 bps and 590 bps respectively on the prior corresponding period.

Long-term strategies: The company’s long-term strategy helped to achieve strong results with key long-term foreign currency hedging policies allowing for long-term merchandise planning, investing in better merchants and delivering a better product, ongoing focus on disciplined execution of markdown management.

On the price-performance front, the stock has generated a YTD return of 13.73%. The company is having a strong balance sheet and its annual dividend yield stood at 4.02% which can be considered at decent levels. Hence, considering the aforesaid facts and current trading level, we recommend a “Buy” rating on the stock at the current market price of $15.800 per share (down 3.659% on March 25, 2019).   
 

Telstra Corporation Limited 

Strong customer growth: Telstra Corporation Limited (ASX: TLS) is into the operations of telecommunications and technology providing a range of communications services to customers.

The company has priced a EUR 600 million bond issue under its Debt Issuance Program Offering Circular dated 12 March 2019. It would be maturing on 26 March 2029 with a coupon of 1.375%.Telstra will use the proceeds from the Notes for general corporate purposes.


Half-year results and operations review (Source: Company Reports)

The revenues for the mobile business were up 2.4 per cent compared to the same period last year. However, the total income on a reported basis was $13.8 billion, down by 4.1 per cent, EBITDA on a reported basis was $4.3 billion, down 16.4 per cent, and NPAT was $1.2 billion, down by 27.4 per cent primarily due to NBN impact. However, excluding the impact of the NBN and one-offs, the company had a solid performance of the underlying business in the current market. 

During the reported period, the company added 308,000 new NBN connections with an estimated NBN market share excluding satellite of 51% reaching a total number of NBN connections from TLS to 2.3 million.

Guidance for FY19: The total income is expected to be approximately $26.2 to $28.1 billion, with EBITDA, excluding restructuring, within a range of $8.7 to $9.4 billion.The free cash flow guidance of the company is between $3.1 to $3.6 billion. The company expects that the free cash flow would be at the lower end of the guidance range primarily because cash Capex will increase as it takes advantage of opportunities in the enterprise and wholesale fibre markets, and cash redundancies will be higher as the company accelerates productivity.

Driven by the reduction in underlying fixed costs which were down 4.2% or $162 million with approximately $900 million in annualised cost reductions achieved since FY16, coupled with higher NBN connections, and robust growth in customer numbers we believe the business to have a decent growth going forward once the NBN impacts are reduced. Hence, we recommend a “Buy” rating on the stock at the current market price of $3.300 per share (up 0.61% on 25 March 2019).

Tabcorp Holdings Limited 

Significant increase in top-line: Tabcorp Holdings Limited (ASX: TAH) is widely engaged in gambling and entertainment services. Recently, the group has announced that BlackRock Group ceased to be a substantial holder of the group since 15 March 2019. The company's constitution, together with an agreement entered with the State of Queensland, contain restrictions prohibiting an individual from having a voting power of more than 10% in the company.

Group Results (Source: Company Reports)

Revenue from ordinary activities stood at $2,787.5 million in 1H19 as compared to $1,338.1 million in 1H18 an increase by ~108% driven by Strong Lotteries & Keno performance from game innovation, and digital and retail growth. Profit from ordinary activities after tax attributable to members was reported at $182.5 million in the six months ended December 2018 which implies an increase of 642% on the YoY basis primarily on higher sales.

What to expect going forward: The company focuses on ensuring a strong and aligned risk-aware and performance culture centred around its new purpose of ‘Excitement with Integrity’. The company has a priority to drive business performance through continued investment in customer experience, product and digital innovation.

The company is having a decent annual dividend yield of 4.45%. Therefore, backed by decent financials and respectable dividend yield, we expect that TAH might attract the attention of market players moving forward. Thus, we maintain our “Buy” recommendation on the stock at the current market price of $4.680 per share (down 0.847% on 25 March 2019).


Stock Price Comparative Chart (Source: Thomson Reuters)     

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