Stocks’ Details

Emeco Holdings Limited

Strong Growth in Profitability:Emeco Holdings Limited (ASX: EHL) is engaged in provisioning of earthmoving equipment services. The company recently announced that it has issued 113,857 performance rights, as a long-term incentive for eligible participants.

FY19 Performance: During the year, operating EBITDA amounted to $214.0 million, up 40% on prior year EBITDA of $153.0 million. Operating EBIT for the year stood at $125.4 million, up 51% on $83.2 million in prior corresponding period. In FY19, the company generated operating NPAT of $63.1 million, up 214% on prior corresponding period. The period saw substantial expansion in EBITDA margin to 46.1%, from 40.2% in the previous year.


Operating Financial Results (Source: Company Reports)

Outlook: The company expects strong demand in Western Australia to enhance commodity diversification. In FY19, the company deleveraged to 2.0x and aim to achieve further deleveraging by growing earnings and using strong operating cash flow to reduce its gross debt.

Stock Recommendation: The stock of the company generated returns of -6.94% and 1.26% over a period of 1 month and 3 months, respectively. In FY19, the company reported a significant growth in earnings. The company’s profit increased remarkably, and leverage reduced to 2.0x, from 2.6x in FY18.Strong growth in earnings was driven by a continued rise in average operating utilisation to 64% in comparison to 58% in FY18, improvement in rental rates, cost control and a full year contribution from Force and Matilda Equipment. The period was also characterised by a strong operating free cash flow of $90.1 million and return on capital of 21.0%, achieved by managing costs and capex. In addition, the company has a favourable outlook for FY20 and beyond. Hence, considering the above factors and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.955, down 2.736% on 18 September 2019.
 

Fluence Corporation Limited

Strong Momentum for MABR Products: Fluence Corporation Limited (ASX: FLC) is a leader in the decentralized water, wastewater and reuse treatment markets.

Half-Yearly Results: During the half-year ended 30 June 2019, the company reported a strong momentum for membrane aerated biofilm reactors (MABR) products. The period was characterised by the largest individual order of 40 Aspiral™ units in China from ITEST. The company saw the commercial launch of SUBRE (Submerged MABR) and secured first commercial orders in Jamaica. 64 cumulative MABR projects were won in China. As a result of strong order inflow, the company reported record contracted backlog of US$278 million as at 30 June 2019.

Update on Recurring Revenue Strategy: During the period, the company closed a project finance facility worth US$50 million. The company is in the final stages of commissioning of the Bimini project in Bahamas and is expecting to start selling water shortly.In addition, construction at the San Quintin project is expected to resume in Q42019.

Revenue from ordinary activities for the period stood at $23.78 million, as compared to $32.81 million in FY18.

1HFY19 Income Statement (Source: Company Reports)

FY19 Guidance: FY19 revenue from MABR products is expected to be approximately US$20 million, representing an increase of US$3 million in 2018.The company expects sustainable EBITDA profitability by Q42019 with a continuous increase expected in secured annual recurring revenue in 2019. In addition, revenue from Smart Product Solutions is expected to be US$26 million, representing a growth of 18% on previous year.

Stock Recommendation: The stock of the company generated returns of 1.16% and 4.82% over a period of 1 month and 3 months, respectively. The company reported good progress in China with 64 MABR projects been awarded since its debut in 2017. The company also signed a US$10 million contract for Brazil’s largest seawater destination plant, which is expected to be completed by Q42020. With the market for water reuse in the US expected to grow over the next two decades, the company has foundations in place to grow in the market. During the six months, R&D expenses increased due to product development costs for China MABR, SUBRE and other wastewater treatment technologies. Currently, the stock is trading slightly below the average of 52-week high and low levels of $0.630 and $0.290, respectively. Hence, in view of aforesaid facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.420, down 3.448% on 18 September 2019.
 

Navigator Global Investments Limited

Management Fee Revenue Witnessed Strong Growth:Navigator Global Investments Limited (ASX: NGI) is engaged in the provision of investment management products and services to investors globally.The company recently updated that the voting power of UBS Group AG reduced to 6.31%, down from 7.59% earlier.

Dividend: The company recently paid a final dividend of US$ 0.09 per share or A$0.132685 per share for 2019 on 30 August 2019.


Dividend Trend (Source: Company Reports)

FY19 Results: In FY19, the company reported management fee revenue amounting to US$105.4 million, up 40% in comparison to the prior corresponding period revenue of US$75.5 million. Closing assets under management stood at US$14.2 million, down 15% on prior corresponding period value of US$16.7 million. EBITDA for the year stood at US$37.7 million, up 10% on pcp EBITDA of US$34.2 million. The addition in revenue during the period was driven by increase in MAS assets and 9% higher average AUM on other assets.

Cash generated from operating activities stood at US$22.6 million. Cash used during the period comprised of $27.5 million paid in dividends to shareholders, $1.6 million paid for investments, $1.5 million for plant & equipment, and $1.1 million for capitalisation of MAS transaction costs.


FY19 Financial Highlights (Source: Company Reports)
 
Stock Recommendation: Over a period of 6 months, the stock gained 9.70% and has a market capitalisation of $531.85 million. In FY19, the company reported decent growth in management fee revenue and EBITDA. Dividends paid by the company from 2015 through to 2019 have shown an upward trend, with FY19 annual dividend yield of 6.80%. The period was characterised by a strong balance sheet with no loans and borrowings and cash balance of US$29.0 million. In FY19, the company had a net margin of 23.4%, higher than the industry median of 21.3%. Considering the above factors, we give a “Buy” recommendation on the stock at the current market price of $3.400, up 3.659% on 18 September 2019.
 
 
 Comparative Price Chart (Source: Thomson Reuters)

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