Stocks’ Details

Webjet Limited

Meaningful EBITDA Contribution expected from Umrah Holidays International: Webjet Limited (ASX: WEB) provides a full range of online travel booking service for flights, car hire, cruises, hotels, and tours. The market capitalisation of the company stood at ~A$1.91Bn on 24th June 2019. Recently, the company informed that Challenger Limited and its entities became a substantial holder of the group with voting rights of 5.04% since 17th June 2019. The company, in its recent investor session presentation, introduced Rezchain and Rezpayments. As per the presentation, Rezchain is a part of WebBeds, which is a B2B division of Webjet Limited. It is a critical component in moving ahead from an “8/5/3” structure to an “8/4/4” (8%- Revenue/TTV, 4%- Costs/TTV and 4%- EBITDA/TTV) in its WebBeds business by FY22. In 1H FY19, the EBITDA stood at $28.5Mn which is up by 11% on pcp basis.


Financial Snapshot (Source: Company Reports)

What to Expect: The Kingdom of Saudi Arabia has vision to welcome 30Mn religious visitors a year by 2030. In order to accomplish this vision, it has taken some initiatives which include improvement of visa procedures, integration of e-services and a range of new facilities such asa new international airport, new railway connections, 35,000 new hotel rooms, etc.  It expects low set up and operating costs, which includes $1Mn set up costs in FY19. It is leveraging existing local supply and global distribution partnerships.

Stock Recommendation: Webjet Limited is expecting meaningful EBITDA contribution to WebBeds AMEA by FY22 by Umrah Holidays International. The company added that, it is on track to deliver at least $120Mn EBITDA. The net margin of the company stood at 15.1% in 1H FY19, which reflects a growth of 9.9% on YoY basis. This implies that WEB is improving its capability to convert its topline into the bottom line. On the stock performance front, it generated the returns of 32.39% and 0.67% in the time span of six months and one year, respectively and is trading above the average of 52 week high and low prices of around $13.95 with a PE multiple of 35.02x and an annual dividend yield of 1.45%. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$13.810 per share (down 2.057% on 24 June 2019).
 

Coles Group Limited

Long-Term Growth Value: Coles Group Limited (ASX: COL) is a retailer of various products like fresh food, household goods, liquor, groceries, fuel, and financial services through stores and online facility. The market capitalisation of the company stood at ~A$17.9Bn as on 24^th June 2019. The company in its investor day presentation stated that it has made an investment in management, stores and brand during FY09 to FY16, driving strong revenue and earnings growth. The company also mentioned that it is a cash generative business, which aims to obtain cash realisation of more than 100%.

A look at Third Quarter Sales results: In the third quarter of FY19, the company entered into an exclusive partnership with Ocado Group in order to bring the world’s leading online grocery platform, automated single pick fulfilment technology, and home delivery solution to Australia. The sales revenue in the third quarter stood at A$7,272 Mn in comparison to the A$7,049 Mn in Q3FY18.


Financial and operating metrics (Source: Company Reports)

Focus and Strategies: The company focuses on improving its working capital management and a disciplined approach towards operating costs. Adding to that, it is also focused on enhancing the capital allocation framework. The company is expecting to reach $1bn cumulative cost reduction through Smarter Selling by FY 2023.

Stock Recommendation: COL enjoys strong cash generation and balance sheet to fund growth and pay an attractive dividend. The return on equity stood at 13.6% in 1H FY19 against the industry median of 5.6%, which showcases that it is providing better returns to the shareholders in comparison to the broader industry.  The current ratio stood at 0.74x in 1H FY19, reflecting YoY growth of 20.4%. This indicates that the company is improving its capability to address its short-term obligations. With respect to the past performance of the stock, it generated returns of 15.89% and 15.59% in the time span of three months and six months, respectively. Hence, considering the aforesaid facts and better returns to the shareholder (depicted by ROE of 13.6%), we give a “Buy” recommendation on the stock at the current market price of A$13.110 per share (down 2.31% on 24June 2019).
 

Bingo Industries Limited

Key takeaways from Macquarie Australia Presentation: Bingo Industries Limited (ASX: BIN) is involved in providing waste management solutions for domestic and commercial businesses. The market capitalisation of the company stood at ~A$1.57 Bn as of 24 June 2019. The company has recently presented its business prospect in the Macquarie Australia conference and stated that post acquisition of DADI and network reconfiguration, its network capacity is expected to expand to 4.7Mn tonnes per annum by FY2020. The company also updated that West Melbourne upgradation has been completed. It is the first recycling centre of the company with advanced recycling equipment in Victoria along with the operational capacity of 350,000 tonnes p.a.
 

Network Capacity (Source: Company Reports)

Future Strategies: For FY20, it is targeting network expansion of 5-10 sites in Victoria. Adding to that, it will invest in waste technology in order to expand production and integrated waste master sites in Victoria. It is expecting recovery rates and EBITDA margins of more than 75% and 20%, respectively. It is also expecting network utilisation of 85%.

Stock Recommendation: For diversification of end-market, it is aiming to increase the percentage of smaller builders and households. It is planning to invest in advanced recycling infrastructure in order to increase the recovery rates. The gross margin of the company stood at 52.2% in 1H FY19 against the industry median of 40.5%. The current ratio stood at 2.33x in 1H FY19 in comparison to the industry median of 1.40x. This implies that BIN is in a decent position to address its short-term obligations. With respect to stock’s past performance, it had generated a return of 58.67% and 29.35% in the time span of three months and six months, respectively. Hence, considering the above-stated parameters and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$2.310 per share (down 2.941% on 24 June 2019).
 

Comparative Price Chart (Source: Thomson Reuters)     

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.