WorleyParsons Limited

A Look at FY 2018 Financials: WorleyParsons Limited (ASX: WOR) ended FY 2018 with total revenues amounting to $4.8 billion which implies the YoY decline of 7.4%. The company recorded aggregated revenues amounting to $4.7 billion in FY 2018 which reflects the YoY growth of 8.5% because of the acquisition in UK. As per the management, the company also witnessed an improvement in the operating cash flow.

WOR’s statutory net debt and FCF (Source: Company Presentation)

Coming to the segment-wise results, the services segment witnessed the negative impacts in FY 2018 on the YoY basis. However, the Canada as well as ANZ region somewhat helped the services segment. WorleyParsons’ major projects and integrated solution or MP&IS segment was helped by the favorable momentum in the Norway as well as UK IS. Finally, the company’s Advisian segment was helped by the favorable momentum in all the sectors with positive performance in Intecsea as well as APAC.

What WorleyParsons Expects Moving Forward: As per the management of WorleyParsons, with the help of favorable market conditions, the company’s clients are helping in boosting the early phase activity which would help it in the next cycle of investment and is evident by the growth in the company’s backlog as well as contract awards.The management of the company is highly optimistic about FY 2019 and expects that it might deliver favorable momentum in the earnings with the help of improved business focus as well as expanding share in the energy and resources markets. The management also plans to strengthen its balance sheet in the next year.

Technical Overview: Two technical indicators, Moving Average Convergence Divergence (MACD) and Relative Strength Indicator (RSI), have been applied on daily chart of WOR using the default values. The MACD line has crossed the signal line and is moving downwards. However, the 14-day RSI has breached the oversold region and hence a rise is expected moving forward. Hence, we maintain “Hold” rating on the stock at the current price of $ 17.970 while the group’s medium term earnings potential can be seen.
 

Challenger Limited

Robust AUM growth: Challenger Limited (ASX: CGF) ended FY 2018 with the group’s assets under management or AUM of $81.1 billion which reflects an increase on the YoY basis. In FY 2017, the group AUM stood at $70 billion. The group’s AUM was helped by the growth in the life as well as funds management AUM. The company generated net income amounting to $822 million in FY 2018 while during the same period the company incurred expenses amounting to $268 million.

Challenger Limited’s dividend payout ratio (Source: Company Presentation)
The company’s life sales amounted to $5.6 billion in FY 2018 which implies the YoY growth of 12% primarily because of the positive momentum in the other life sales i.e. apart from annuity.

What to Expect from Challenger Limited:The management of Challenger Limited expects to position the company in such a manner that it could achieve the next growth phase. As a result, the company plans to work on four strategic pillars. First, it plans to increase the deployments towards stable as well as secure retirement incomes. Second, the company plans to make available those investments to its clients which are promising and are superior. Third, it plans to become market leader and plans to enter into partnerships. Finally, it would be working on those business practices which would aid the company in delivering the strong outcomes.  

Technical Overview: Exponential moving average or EMA has been plotted on the daily chart of Challenger Limited using the default values.As per the observation, the stock price is expected to cross the EMA and that would be bullish cross over which reflects that after the crossover the price is expected to move upwards. Hence, we maintain our “Buy” rating on the stock at the current price of $ 10.720 while CGF’s annuities are expected to become a rapidly growing product.
 

Woolworths Group Limited

Improved Performance in Australian Food:Woolworths Group Limited’s (ASX: WOW) Australian food division ended FY 2018 with sales amounting to $37.3 billion which implies an increase of 4.3%. During the same period, the company witnessed YoY growth of 9.4% in its earnings before interest, tax, depreciation and amortization or EBITDA to $2.4 billion.

Australian Food’s FY 2019 priorities (Source: Company Presentation)

In New Zealand Food’s segment, the company has been witnessing the strong momentum in the online channel. The segment also experienced lesser prices coupled with the process improvement. In this segment, the management plans to work towards driving the digital growth.

How Does Woolworths Group’s Future Look Like: There are a number of opportunities for Woolworths Group moving forward and the group can witness long-term growth based on these opportunities. The company’s management believes that the sales in regard to the Australian food would experience the positive momentum as the company is certain about strategies which it plans to deploy. The company would be making further investments in regard to the CountdownX. In Big W segment, the company expects decrease in the losses.

Technical Overview: Relative Strength Index has been applied on the daily chart of Woolworths Group using the default values. The 14-day RSI is expected to reach its oversold zone soon and after that it is expected that the stock would rise. Therefore, we maintain “Hold” rating on the stock at the current price of $ 27.490.
 

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