ALS Ltd (ASX: ALQ)

Turnaround to loss from profit in 1H FY18: ALS Ltd.’s (ASX: ALQ) stock has fallen 7.4% on November 21, 2017 after the company announced its 1H FY 18 results and share buyback plan. ALQ in the first half of FY 18 has reported the underlying net profit after tax from continuing operations of $70.1 million, which is at the lower end of the ALQ’s guidance range of $70 million to $75 million. ALQ has posted the net loss after tax attributable to equity holders of the company of $8.9 million, against a net profit of $48.7 million recorded in the half year to September 2016. The company has experienced uncertain market conditions in the sectors serviced by the Coal and Industrial businesses. However, the revenue from continuing operations grew to $721.6 million on the $630.2 million recorded in the previous corresponding period. This growth was owing to the strong organic growth in the Commodities business and acquired and organic revenue gains in Life Sciences. Moreover, in FY 18, ALQ expects the group underlying profit after tax to be in the range of $135 million to $145 million. Additionally, ALQ has announced an on-market share buyback of up to $175 million after the divestment of its Oil & Gas business and review of ongoing capital requirements. Meanwhile, ALQ stock has risen 6.26% in three months as on November 20, 2017. Based on the foregoing, we give an “Expensive” recommendation on the stock at the current price of $7.55
 

1H 18 Financial Performance (Source: Company Reports)
 

GrainCorp Ltd (ASX: GNC)

Softness in Outlook: Consumer staple group, GrainCorp Ltd.’s (ASX: GNC) stock plunged 4.9% on November 21, 2017 while the group released its full-year profit result that was benefitted by a large grain harvest and higher export volumes. The group’s net profit for the year has been up to $125.2 million from $31 million of FY16. The boost came in from the crop scenario in eastern Australia and performance by GrainCorp Malt. Further, increased storage, handling and merchandising opportunities, at the back of large harvest helped the group. GNC could also execute a large grain export program while there were high global crop supplies and depressed grain prices, which posed pressure for Australian growers. Given the performance, the group increased its dividends per share to provide value to shareholders.
 

Segment-wise Financial Performance (Source: Company Reports)
 
However, the softness in outlook led the stock move on a downswing. The crop in the current fiscal year has been said to be substantially smaller in eastern Australia, with production tilted to Victoria and southern NSW. This is expected to give a below-average exportable surplus. Despite the group putting in efforts on cost management and better efficiencies, GNC faces a challenging year with mounting energy costs in terms of sustainability of food and malt processing in Australia. We believe that the stock is “Expensive” at the current price of $8.13
 

Village Roadshow Ltd (ASX: VRL)

Completed the sale of 50% stake in the Golden Village: Village Roadshow Ltd (ASX: VRL) had completed the sale of its 50% stake in the Singapore cinema exhibition business, Golden Village, to Orange Sky Golden Harvest (Holdings) Limited for approximately A$164 million, in October 2017. Moreover, Linius Technologies Limited have been appointed by Roadshow Films, which is a division of Village Roadshow, to provide its anti-piracy technology solution, centred on a patented Video Virtualization Engine. IBM, as Linius’ collaboration partner, is co-ordinating the design and integration of the Linius VVE anti-piracy solution with existing Roadshow Films infrastructure. VRL in FY 18, is tracking well on the cost reduction initiatives and demonstrated a strong start to the year with key promotions already in market including Harvey Norman wine offer, Mars Petcare GWP, Cadbury Favourites and Kellogg’s movie offers. Further, there is strong performance from key clients HP, Intel and Samsung in the opening months of FY18. Given the present volatility with VRL stock plunging 2.3% on November 21, 2017, we give a “Hold” recommendation at the current price of $3.76

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