Stocks’ Details

Australian Pharmaceuticals Industries Limited

API Reports Growth in Market Share:Australian Pharmaceuticals Industries Limited (ASX: API) is a wholesale distributor of pharmaceutical and allied products. The company also provides support services to pharmacists. The market capitalisation of the company stood at ~$672.31 million as on 5^th November 2019.

API reported growth in market share and contribution from Consumer Brands, Priceline Pharmacy and Clear Skincare businesses. The company also reported a solid cash generation and stable market share from its Pharmacy Distribution business. Reported EBIT stood at $94 million, up 14.1% on the prior corresponding period. Underlying EBIT stood at $94 million, up 3.9% on pcp.

API continued to leverage its existing infrastructure and market expertise to deliver solid profit growth in a challenging market. Company’s debt increased from $55.9 million at the end of August 2018, to $199.1 million as at 31 August 2019. The YoY increase came in as a result of acquiring 12.95% stake in Sigma Healthcare Limited, investing in Clear Skincare clinics and an investment in Consumer Brands inventory. API has declared a fully franked dividend of 4 cents per share for FY19, which results in a payout ratio rising from 66% to 70% over the last three years.


Financial Overview (Source: Company Reports)

Outlook: The company remains focussed on delivering its core strategy, and it has a combination ofcash generative wholesaling business and a growing portfolio of synergistic healthcare and retail offerings. Although the company has proved its ability to return positive retail sales, the consumer confidence is expected to remain soft.

Stock Recommendation: The stock has given a return of -1.80% and 1.87% in the last three months and six months, respectively, and is currently trading below the average of 52-week low and high. The company has reported a decent CAGR growth of 3.78% in its revenue over the period of FY15 to FY19. The stock is trading at a price to earnings multiple of 12.190x on a TTM basis, below the industry median of 14.8x on TTM basis. Therefore, considering the FY19 results, decent outlook and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $1.375 per share, up 0.733% on 5^th November 2019.
 

Noni B Limited

Significant Increase in Underlying EBITDA:Noni B Limited (ASX: NBL) is engaged in fashion retailing of women’s apparel and accessories. The market capitalisation of the company stood at ~$251.99 million as on 5^th November 2019. As per a recent announcement, the company updated that the 2019 AGM will be held on 21 November 2019. In another update, the company stated that the voting power of Perpetual Limited increased from 5.46% to 8.00%.

FY19 was a successful year for the company as underlying EBITDA increased by 22% to $45.5 million. The company consolidated and integrated five additional brands acquired from Specialty Fashion Group on 2 July 2018. The increase of 22% in underlying EBITDA was a significant achievement, provided a considerable change within the business and an uncertain economic climate globally and domestically.

Noni B reported NPAT of $8.2 million, against $17.3 million in the prior period. This NPAT figure includes $9.1m of restructuring costs before tax and $10.6m of additional depreciation charges relating to the acquired brands.

The company generated positive operating cash flow of $23.5 million and net cash of $7.1 million at the year end. The company declared an interim fully franked dividend of 9.0 cents per share in March 2019, and in October 2019, the company declared a fully franked dividend of 5.5 cents per share, bringing the total dividends to 14.5 cents per share.


Trade Overview (Source: Company Reports)

FY20 Outlook: The company expects EBITDA for FY20 will be in-line with the market consensus of $75 million. The company looks forward to the potential to be unlocked through greater analysis of the Group’s data, store expansion and online strategies. The company is also looking forward to further revenue and earnings growth in FY2021 and beyond.

Stock Recommendation: The stock has generated a negative return of 4.41% in the last six months and is trading below the average of 52-week low and high. The company has reported a CAGR growth of 68.12% in its revenue over the period of FY15 to FY19. The stock is trading at an EV/EBITDA multiple of 4.3x on TTM basis, which is below the industry average of 15.2x.Therefore, considering aforesaid facts coupled with decent outlook and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $2.600 per share as on 5^th November 2019. 
 

Kina Securities Limited

Kina Bank Completes Acquisition of ANZ PNG’s Retail, Commercial and SME business: Kina Securities Limited (ASX: KSL) provides commercial banking and financial services.  The market capitalisation of the company stood at ~$234.51 million as on 5^th November 2019.

Kina Securities Limited has announced that its wholly owned subsidiary, Kina Bank Limited, has completed its transformative acquisition of ANZ’s retail, commercial and SME business in Papua New Guinea. The acquisition represents a key component of its five-year strategic plan and it is a milestone for the company. It supports theirobjectives to deliver greater value to its customers and develop a more resilient and sustainable Group. After the acquisition, Kina Bank has become the second largest retail bank in Papua New Guinea. Kina Bank entered into a binding Sale and Purchase Agreement (SPA) with ANZ PNG in June 2018 and the acquisition includes retail customer deposits and loans (including credit cards), commercial/SME customer loans and deposits, ANZ PNG’s 15 retail branch premises, 72 ATMs and over 1,800 EFTPOS terminals used by ANZ PNG.

Kina Bank Acquires 15% Stake in Nationwide Microbank Limited: Kina Securities Limited has announced that it has entered into a share subscription agreement with microfinance institution Nationwide Microbank Limited (MiBank). Under the agreement, Kina Bank will subscribe for 2,239,148 new ordinary shares to be issued by MiBank, for a consideration of PGK 2,575,020. After the issue, Kina Bank will hold a 15% stake in MiBank.

1H19 Highlights: During the first half, the company generated statutory NPAT amounting to PGK 23.6 million, up 14% on pcp. Net interest income for the period stood at PGK 45.7 million, up 10% on pcp.


Income Statement (Source: Company Reports)

What to Expect: The foundation work has been completed in 1HFY19, which sets the company for the successful 2H, to improve its market position and emerge as the leading participant in Retail, SME and Commercial sectors.
Stock Recommendation: The stock is currently trading close to its 52-week high level of $1.520. Over the last three months and six months, the stock has generated returns of 5.15% and 27.68%, respectively.Considering the above scenario, we can presume that most of the positive factors have been discounted at the current juncture. Hence, we give an “Expensive” recommendation on the stock at the current market price of $1.425 per share, down 0.35% on 5^th November 2019, and wait for catalysts to drive the stock.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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