Stocks’ Details

Collins Foods Limited

CKF’s FY 2018 was driven by acquisitions: Collins Foods Limited (ASX: CKF) ended FY 2018 by recording a YoY rise of 21.7% in the underlying revenues to $770.9 million. During the same period, on the YoY basis, the company’s net debt witnessed a rise to $227.2 million on the back of completion of the acquisitions in Australia as well as Netherlands. The management of the company reflected favourable views on the FY 2018 results and stated that the company witnessed the favourable momentum in the KFC Australia business with the help of organic underlying growth as well as acquisitions. These acquisitions have helped the company in increasing the presence in Australia and it had also consolidated the company’s position as the largest operator of the KFC in Australia.

Acquisitions expanded CKF’s overall KFC footprint (Source: Company Reports)

Collins Foods Limited has also managed to establish the presence in the European region which would provide the robust growth opportunities for the long-term. The company also encountered growth in the Sizzler Asia as it manages to increase the presence. A YoY 9.7% rise in the Royalty revenues were also witnessed on the back of strong value offering as well as because of the opening of the new restaurants.

What Investors Need to Expect: In FY 2018, Collins Food’s KFC Europe has witnessed developments in terms of building of the new restaurants. In Germany, two restaurants were built and in Netherlands too, two restaurants came into existence. KFC Europe recorded capital expenditure or CAPEX amounting to approximately $12 million in FY 2018. Moving forward into FY 2019, the company is expected to come up with 6-8 additional restaurants in Europe of which two have been opened in Germany. Also, in Germany, KFC Europe might witness three major remodels and in Netherlands, it might encounter four major remodels.  

The management of the company stated that moving forward, they would continue to maintain its focus towards growing the KFC Australia business and it plans to work towards further improvement of the WA business. Additionally, the company is looking to come up with home delivery activities from more KFC restaurants with the help of its own channel as well as aggregators. 

Stock Analysis: On the monthly chart of Collins Foods Limited, Moving Average Convergence Divergence or MACD, has been applied and default values have been considered. As per the observation, the MACD line has crossed the signal line and is moving upwards. Therefore, the stock might witness bullish momentum moving forward. Therefore, we maintain our “Buy” rating on the stock at the current market price of A$6.680 per share.
 

Qantas Airways Limited

Strong Demand, Low Net Debt Aided FY 2018 Performance: Qantas Airways Limited (ASX: QAN) ended FY 2018 by witnessing strong positive momentum. The company managed to generate underlying PBT amounting to $1.6 billion in FY 2018 which implies the YoY growth of 14%. The company managed to witness strong results despite the higher fuel prices environment. The company stated that robust demand as well as revenue environment offset the elevated levels of the fuel prices. The company ended FY 2018 with net debt amounting to $4.9 billion while it ended FY 2017 with net debt of $5.2 billion. Lower net debt would be beneficial for the company in terms of the financial flexibility.

   QAN’s EPS (Source: Company Reports)
Qantas Airways generated net freight revenues amounting to $862 million in FY 2018 which implies the growth of 7% and was helped by the recovery encountered in the global freight markets.The company stated that the impact of the higher fuel prices as well as consumption got partially offset by the transformation initiatives as well as favourable hedging strategies.

Qantas Airways Is Expected to Recover from Fuel Price Increases: The management of Qantas Airways stated that they are in the strong position to recover the elevated levels of the fuel prices.Domestically, the company expects to recover with the help of execution of dual brand strategy as well as capacity discipline. The company stated that favourable momentum in the loyalty business helps the company to diversify the earnings without any direct exposure to the increased fuel prices.

The company’s management stated that the transformation program is expected to give approximately $400 million in terms of the gross benefits in FY 2019.They also added that the company is expected to garner robust cash flows.
Stock Analysis: Exponential Moving Average or EMA has been applied on the daily chart of Qantas Airways and the default values have been considered. As per the observation, the stock price is expected to cross the EMA and after the crossover, it might witness an uptrend. Therefore, a bullish momentum is expected to build. As a result, we maintain our “Buy” rating on the stock at the present market price of A$5.580 per share.
 

Magellan Global Trust

Substantial Exposure Towards Technology Stocks: Magellan Global Trust (ASX: MGG) has already reported its fund update for the month of October 2018. As per the update, it has substantial exposure in the technology stocks and thus any volatility in the technology stocks is expected to significantly impact MGG’s performance. During August 11, 2017 to June 30, 2018, Magellan Global Trust’s total net investment income amounted to $195.8 million. During the same period, it incurred total expenses amounting to $19.2 million and the highest among the total components are the management and administration fees.

Magellan Global Trust managed to generate profit amounting to $176.6 million during August 11, 2017 to June 30, 2018. MGG’s principal activity revolves around making investments in the portfolio consisting of 15-35 high quality stocks (global). The company seeks help from Magellan Asset Management Limited or MAM. Magellan Asset Management undertakes company research to point out the stock which it thinks is a high-quality company. It also assesses the macro-economic environment.

How Does MGG’s Future Look Like: The future prospects of MGG are sensitive to the global macro factors as well as to the investment markets’ performance in which it makes investments. MGG has significant exposure towards Internet and e-Commerce sector as well as in consumer defensive. Moving forward, if technology recovers and witnesses an upward momentum, MGG’s performance is expected to improve.


 
Sector-Wise and Geographical Exposure (Source: Company Reports)

From the geographical viewpoint, according to the October 2018 fund update, MGG generates 47% of the revenues from the United States or US. Thus, the global factors which impact the US markets are likely to impact MGG’s performance moving forward.

Stock Analysis: Relative Strength Index or RSI indicator has been applied on the daily chart of Magellan Global Trust and default values have been considered. As per the observation, 14-day RSI is trending towards the oversold region. Once it reaches the oversold region, an upward momentum is expected. Moreover, moving forward, the recovery in the technology stocks is expected which would positively impact the broader investment markets. This could improve MGG’s performance. Therefore, we maintain our “Buy” rating on MGG at the current market price of A$1.630 per share. 
  

 Stock Price Comparative Chart (Source: Thomson Reuters)
 

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