Stocks’ Details
 

Shopping Centres Australasia Property Group

 
SCP Completes Institutional Placement of $250 million: Shopping Centres Australasia Property Group (ASX: SCP) is engaged in providing medical imaging services throughout New Zealand and Australia. On 8 April 2020, the company successfully completed its fully underwritten institutional placement of $250 million through the issue of 115,740,741 new fully paid ordinary units. The units will settle on 15 April 2020, with allotment scheduled for 16 April 2020. Proceeds from the underwritten placement will be utilised to bolster the company’s balance sheet and improve operational flexibility.
 
COVID-19 Impact: Recently, the company stated that it expects various government incentive packages to aid SCP’s small business tenants and customers. Further, the company expects COVID-19 crisis to provide opportunity to secure quality assets at competitive prices in the coming months. The company has more than $550 million in cash and undrawn facilities, post the equity raising.
 
Other Recent Updates:In another update, the company stated that it is withdrawing its FY20 outlook amid the rising uncertainty due to coronavirus outbreak. The company is focusing on health and safety of its employees and clients, along with confirming business continuity across its operations.
 
1HFY20 Key Highlights for the Period ended 31^st December 2019: During the period, the company reported statutory NPAT of $90.2 million, soaring 129.5% year over year, owing to higher investment property valuation. Funds From Operations (“FFO”) increased 19.1% and came in at $78.5 million. Funds From Operations per unit (“FFOPU”) stood at 8.44 cents per unit, up by 4.2% year over year. Gearing ratio went up by 1.4% and stood at 34.2%.
 

Key Financial Highlights (Source: Company Reports)
 
Valuation Methodology:P/E Multiple Based Relative Valuation 

P/E Multiple Based Relative Valuation Approach (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of SCP is trading below the average of its 52-week low and high of $1.975 and $3.185, respectively. The stock has corrected ~14.49% and ~11.28% in the last three months and six months, respectively. The company has a P/E multiple of 13.51x, with dividend yield of 6.33%. We have valued the stock using P/E based relative valuation approach and have arrived at a correction of lower single digit (in percentage terms). Hence, taking into consideration the covid-19 impact and current trading level, we have a watch stance on the stock at the current market price of $2.21 per share, down by 6.356% on 8 April 2020.
 

Reece Limited

 
REH Completed Institutional Offer Placement: Reece Limited (ASX: REH) is a top supplier of plumbing, bathroom, heating, ventilation, waterworks, air conditioning and refrigeration products with operations across Australia, New Zealand and the US. On 7 April 2020, the company successfully completed the institutional component of the equity raising, which was announced on 6 April 2020. The fully underwritten institutional placement and Institutional Entitlement Offer together raised ~$600 million.
 
1HFY20 Key Highlights for the Period ended 31^st December 2019: During 1H20, the company’s revenue grew by 9% on year over year basis and stood at $2,962 million. Normalised EBITDA for the period came in at $263 million, up 1% year over year. Net profit after tax on normalised basis came in at $113 million, up 7% year over year. The company declared an interim dividend of 6 cents per share for 1HFY20. During the period, US sales revenue increased by 19% and by 9% on a like-for-like, constant currency basis whereas ANZ sales revenue remained flat, owing to soft market conditions. In 1HFY20, MORSCO added 11 stores to its network, bringing the total to 186, which included 6 from the acquisition of Todd Pipe. ANZ footprint was expanded through the addition of 5 new branches, taking the total to 639.
 

1HFY20 Key Highlights (Source: Company Reports)
 
Outlook: As the companies are moving into a more difficult environment, REH remains on track to explore new growth prospects and is focused on bolstering its business model. The company is also aiming for long-term success with steady and consistent shareholder returns.
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation

EV/Sales Multiple Based Relative Valuation Approach (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of REH is inclined towards its 52-weeks’ low level of $7.700, proffering a decent opportunity for accumulation. The stock has corrected ~25.28% and ~19.51% in the last three months and six months, respectively. The company has a P/E multiple of 22.79x, with a dividend yield of 2.38%. Considering the trading levels and decent financial performance, we have valued the stock using EV/Sales multiple based relative valuation method and arrived at a target price with an upside of high single-digit (in percentage terms). Hence, we recommend a ‘Buy’ rating on the stock at the current market price of $8.73, up by 2.706% on 8 April 2020. 
 
 

Flight Centre Travel Group Limited

 
FLT Completes Placement & Institutional Offer: Flight Centre Travel Group Limited (ASX: FLT) is mainly engaged in travel retailing in the leisure and corporate travel sectors. On 7 April 2020, the company announced successful completion of its placement and the institutional entitlement offer. Both the offers together raised $562 million at $7.20 per New Share. Further, the company has requested its voluntary suspension of trading in FLT’s shares to be lifted from the commencement of trading on 7^th April 2020. Notably, the company will raise ~$138 million, in its Retail Entitlement Offer, which is scheduled to commence on 15 April 2020. Proceeds from the offering will be utilised to strengthen the company’s balance sheet and liquidity position.
 
Impact of COVID-19: Amidst the rising COVID-19 outbreak, governments across countries have announced lockdown and have imposed restrictions on non-citizens entering, or citizens leaving their countries. In such a scenario, FLT Flight Centre has witnessed total transaction value (TTV) tracking at around 20-30% of normal levels in March 2020. Additionally, the company expects, further declines in TTV in coming weeks as travel restrictions continue due to rise in COVID-19.
 
Recent Update on Coronavirus Challenges: On 13 March 2020, the company stated that amid the uncertainty due to coronavirus outbreak it has withdrawn the guidance for FY20 PBT, which was previously anticipated in the range of $240 million - $300 million. While the business is currently battling the challenges put forward by COVID-19, it however aims for both operational and financial stability in the long-term.
 
1HFY20 Key Highlights for the Period Ended 31 December 2019: During the period, the company’s revenue went up by 5.8% year over year and came in at $1,546 million. Group TTV stood at $12,399 million, up 11.2% year over year, due to solid growth across all regions. Underlying PBT, however, dropped 26.9% on pcp.
 

Key Highlights (Source: Company Reports)
 
Valuation Methodology: P/E Multiple Based Relative Valuation 

P/E Multiple Based Relative Valuation Approach (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of FLT is inclined towards its 52-weeks’ low level of $8.687, proffering a decent opportunity for accumulation. The stock has corrected ~74.73% and ~76.33% in the last three months and six months, respectively. Considering the trading levels and decent financial performance, we have valued the stock using P/E based relative valuation method and have arrived at an indicative target price offering an upside of high single digit (in percentage terms). Taking into account the risk and uncertainty associated with COVID-19 impact, expected decline in TTV, along with the above stated valuation, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $10.6, up by 6.106% on 8 April 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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