Stocks’ Details

Magellan Financial Group Limited

FY19 NPAT Increased By ~78% on Previous Year:Magellan Financial Group Limited (ASX: MFG) is involved in funds management with the objective to offer international investment funds to high net worth and retail investors in Australia and New Zealand, and institutional investors, globally. Recently, one of the company’s director Hamish McLennan, acquired 5,000 Ordinary Shares at A$50.9942 per share, taking the final holdings to 105,248 Ordinary Shares and 86,088 Units in (ASX: MGG), effective from September 19, 2019.

Financial Highlights for FY19 (for the period ended June 30, 2019):Total revenue for the period was reported at A$617.39 Mn, as compared to A$452.59 Mn in FY18. Net profit after tax for the period was reported at A$376.95 Mn, as compared to A$211.79 Mn in FY18. Total dividends (interim, final and performance fee dividends) increased by 38% to 185.2 cents per share.


FY19 Income Statement (Source: Company Reports)

Funds Under Management as on August 30, 2019:Magellan Financial Group Limitedheld total FUM of A$92,092 Mn on August 30, 2019, as compared to A$89,730 Mn on July 31, 2019.Retail portfolio amounted to $24,416 Mn and Institutional portfolio amounted to A$67,676 Mn. Exposure in Global Equities, Infrastructure Equities and Australian Equities stood at A$68,291 Mn, A$16,154 Mn and A$7,647 Mn, respectively.

Stock Recommendation:MFG’s share generated a whopping YTD return of 126.66%. Its gross margin, EBITDA margin and net margin for FY19 stood at 97.4%, 83.2% and 61.2%, better than the industry median of 95.7%, 59.8% and 21.3%, respectively, implying decent fundamentals of the company. ROE for FY19 stood at 55.7%, better than the industry median of 6.2%. Its current ratio for FY19 stood at 6.20x, better than the industry median of 1.46x. On the valuation front, the stock is available at price to book multiple of 13.3x, above than the industry median of 1.4x. EV/Sales multiple at 16.4x is also higher than the industry median of 5.3x, indicating an overvalued position at the current juncture. Hence, considering the aforesaid facts and current trading levels, we recommend an “Expensive” rating on the stock at the current market price of A$50.870, down 4.827% on September 25, 2019.
 

Breville Group Limited

FY19 NPAT Increased By 15.2% On Previous Year:Breville Group Limited (ASX: BRG) is involved in designing and developing innovative world class small electrical kitchen appliances. Recently, BRG issued 286,805 fully paid ordinary shares in the capital of the Company as a result of the vesting of Performance Rights issued under the Company’s Share Plan.

FY19 Key Highlights:Revenue for the period increased by 17.5% to A$760.0 Mn. EBIT increased by 12.0% to A$97.3 Mn. NPAT for the period increased by 15.2% to A$67.4 Mn. A final dividend of 18.5 cents per share (60% franked) has been declared (FY18: 16.50 cents, 60% franked), bringing the total dividends for the year to 37.0 cents per share, 60% franked. This final dividend has a record date of 13 September 2019 and is payable on 27 September 2019. ROE improved to 22.7% with increased investment in working capital, arising from business growth plus some specific tactical inventory builds and receivables, arising from onshore model in Europe. Net cash at the end of the period was reported at A$9.8 Mn, as compared to A$58.0 Mn on June 30, 2018.


FY19 Key Metrics (Source: Company Reports)

What to expect:In FY19, the group launched new products such as Smart Oven Pizzaiolo^TM, “brand launched” in the USA; Bambino Express™, compact espresso machine; Barista Express Pro^TM launched in ANZ; Creatista Uno^TM rolled out globally; Super QTM blender, a quiet super blender with personal and vacuum blending; and extended blender range and extended Tea Maker™ range. In July 2019, Breville acquired the ChefSteps business in the US, acquiring not only over 850 professionally produced recipe and instruction videos and a connected community, but a compelling Sous Vide product that slots right into our existing and expanding Sous Vide range. Moreover, the group plans to enter Spain and France in FY20, further leveraging the already established European warehousing, logistics, customer service and back office functions.

Stock Recommendation:BRG’s share generated a positive YTD return of 58.01%. Its gross margin, EBITDA margin and net margin FY19 stood at 35.7%, 14.9% and 8.9%, better than the industry median of 28.3%, 10.1% and 6.7%, respectively, implying decent fundamentals for the company. Its ROE for FY19 stood at 22.7%, better than the industry median of 21.1%. Its current ratio for FY19 stood at 2.57x, better than the industry median of 1.58x. The stock is currently trading above the average of 52 week-high and low levels of $19.660 and $10.130, respectively. Hence, considering the aforesaid facts and YTD appreciation in the stock price, we have a watch stance on the stock at the current market price of $16.190, down 2.234% on September 25, 2019 and suggest investors to wait for better entry levels.
 

Pro Medicus Limited

FY19 NPAT Increased By 91.9% On Previous Year:Pro Medicus Limited (ASX: PME) is involved in supply of healthcare imaging software and services to hospitals, diagnostic imaging groups and other health related entities in Australia, North America and Europe. Recently, the founders sold 1 million shares each, which was in addition to 1 million shares (each) sold on March 20, 2018, in order to improve the liquidity in the company’s shares. Following this, the founders have informed the Board that they do not intend to sell any further shares in PME before the trading period which follows their half year results in February 2020 and may not do so at that time.

FY19 Key Highlights for the period ended on June 30, 2019: The Company reported a record after-tax profit of A$19.1 Mn, an increase of 91.9% on year-on-year basis. Revenue for the period was reported at A$50.1 Mn, a rise of 47.9% on year-on-year basis. The decent growth was led by the expansion seen in revenue from all key jurisdictions, such as 42.2% in North America, 102.3% in Europe and 30.2% in Australia. Company’s cash reserves as on June 30, 2019 was reported at A$32.3 Mn with no debt. The company announced a final dividend of 4.5 cents per share fully franked, with record date and payment date on September 13, 2019 and October 4, 2019, respectively. Total dividend for the year increased by 75% to 10.5 cents per share. During the year, PME entered the S&P/ASX 200 index, which is based on the 200 largest ASX listed companies.


Revenue Information FY15-FY19 (Source: Company Reports)

What to Expect: As per the FY19 report, the company’s pipeline was growing and will continue to actively pursue opportunities in the large enterprise, academic, corporate and private imaging centre markets. Its North American pipeline continues to be strong, both in terms of quantity and quality of prospects. The company is also seeing a greater impact from the network effect of its growing base of Tier 1 academic clients, which it believes, to provide them with a strategic advantage in the emerging fields of Enterprise Imaging and Artificial Intelligence.

Stock Recommendation: PME’s share generated a positive YTD return of 162.14%. Its EBITDA margin and net margin for FY19 stood at 63.2% and 38.0%, better than 58.3% and 29.4% in FY18, respectively. Its ROE for FY19 stood at 45.3%, better than 28.5% in FY18 which implies that the company generated better return for its shareholders in FY19 than the previous year. Its current ratio for FY19 stood at 3.77x, better than 3.48x in FY18, indicates the better liquidity position for the company in FY19 than previous year. However, looking at the valuations on TTM basis, EV/Sales multiple at 57.7x against the industry median of 10.0x indicates the stretched valuation at current juncture. Currently, the stock is trading towards its 52-week high price of $38.39 with PE multiple of 161.14x. Hence, considering the aforesaid facts along with valuation and current trading levels, we recommend investors to take profits on the stock at the current market price of $28.080, down 5.803% on September 25, 2019.

 
 Comparative Price Chart (Source: Thomson Reuters)

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