Super Retail Group Ltd

SUL Details

Robust performance across business segments: For FY17, Super Retail Group Ltd (ASX: SUL) has posted 25% yoy (year on year) increase in Normalised Net Profit After Tax (NPAT) at $135.8 million, and 18.3% yoy growth in Earnings Before Interest and Tax (EBIT) at $207.3 million. Additionally, reported NPAT includes non-cash transformation costs of $34.0 million associated with the merging of the Rebel and Amart Sports businesses. Robust performance is driven by strong contribution from all divisions with Auto, Leisure and Sports Segments’ EBIT growth of 6.1%, 36.6% and 17.4%, respectively. All three divisions generated an increase in EBIT margins driven by solid like for like sales growth, improvement in gross margin and control of operating costs. Moreover, the transformation initiatives undertaken during the last two years have contributed to the strong results, with the significant improvement in performance in the Leisure Division and the elimination of losses in the Infinite Retail business in the Sports Division. Operating cash flow increased by $75.3 million to $234.5 million during the period.


Financial performance trend; (Source: Company reports)

Further, the Group has had a solid start to FY18 with each division delivering positive like for like sales growth at ~4% in Auto Retailing, ~7% in Leisure Retailing and ~2 in Sports Retailing for the first seven weeks of the new financial year. The stock price surged 7.5% on August 25, 2017 at the back of the result. Given the commendable performance and improving outlook, we maintain a “Hold” recommendation on the stock at the current price of $ 8.40

Nanosonics Ltd

NAN Details

Extension of Trophon relationship with GE Healthcare:  Nanosonics Ltd (ASX: NAN) has entered into a new Capital Reseller agreement with GE Healthcare which will come into effect at the end of the current GE Healthcare Distribution agreement. The new three-year agreement commences on 1 July 2019 and provides GE Healthcare Capital Reseller rights as part of Nanosonics’ global Ultrasound OEM program. The new arrangements provide GE Healthcare’s customers ongoing access to the state of the art Trophon through the GE Healthcare ultrasound sales channel in North America. Notably, Nanosonics will gain a material increase in both sales and margin on consumables in North America as of and beyond July 2019. The Trophon technology is clearly well advanced in establishing itself as standard of care in North America. Moreover, as the risk of cross contamination with ultrasound procedures leads to more international guidelines being implemented, Nanosonics and GE Healthcare have also introduced a framework that will allow to continually assess and implement international capital reseller opportunities as new markets develop.

For FY17, NAN has reported 58% yoy growth in total sales at $67.5 million, driven by a 41% increase in the global installed base of Trophon units to over 14,100 and a rapidly growing annuity revenue stream from consumables portfolio. Accordingly, gross profit increased 56% to $50.2 million compared with $32.2 million in the prior year, led by changes in the sales mix between distribution channels and product categories. The consolidated profit after tax jumped 213% yoy to $2.6 million from $1.2 million in FY16. The continued strong adoption of Trophon technology has resulted in the significant pre-tax profit of $13.9 million, with free cash flow for the year of $15.1 million and a balance of $63.0 million of cash and cash equivalents. 

Financial summary; (Source: Company reports)
 
NAN stock moved up 14.2% on August 25, 2017. Given the strong growth in North America coupled with improving momentum in European and Asia Pacific businesses and extension of Trophon relationship with GE Healthcare, we give a “Speculative Buy” recommendation on the stock at the current market price of $ 2.50

Medibank Private Ltd

MPL Details

Subdued outlook for FY18: For FY17, Medibank Private Ltd (ASX: MPL) reported 7.6% yoy growth in NPAT to $449.5 million, primarily driven by 134.9% increase in investment income at $139.3 million, more than offsetting lower operating profit for Health Insurance business. Health Insurance Operating Profit decreased to $497.5 million from $510.7 million in FY16, led by increased investments in customer benefits and new IT system amortisation. Moreover, the overall premium revenue witnessed a subdued growth of 1.2% yoy, while paying record $5.2 billion in benefits to customers. Further, industry volume growth continued to slow during the year and reflecting challenging business environment. Medibank health revenue declined 3% yoy to $552.1 million, however, operating profit rose 44.0% to $35.7 million due to the divestment of underperforming businesses in 2016. The stock has moved up about 6.7% on August 25, 2017.
 

Group Financial summary; (Source: Company reports)
On the other hand, FY18 Health Insurance outlook is estimated to be impacted by flat overall market volumes due to further decline in the participation rate, while improvement is expected by the end of 2019. Management expenses are estimated to be lower, including the benefit of $20 million in productivity savings. Given the outlook for FY18 with flat overall volumes and declining member participation in health insurance; and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of $ 2.87

Qantas Airways Ltd

QAN Details

Benefitted from transformation program: For FY17, Qantas Airways Ltd (ASX: QAN) reported an Underlying Profit Before Tax of $1,401 million and a Statutory Profit Before Tax of $1,181 million. The underlying result represents the second highest performance in Qantas’ 97-year history, although down 8.6% compared with last year’s record. It is slightly above the guidance range provided, mainly due to strengthening of the group’s domestic businesses. A drop in statutory profit before tax of $243 million reflected that the FY16 result included the gain on sale from the Sydney Domestic Terminal. Overall, the FY17 performance shows the Qantas Group’s margin advantage over local and global competitors, which has been underpinned by completion of its three-year transformation program.


FY17 Key Group Financial Metrics; (Source: Company reports)

On the guidance front for FY18, given its hedging program, fuel costs are expected to be no more than $3.16 billion and are tracking at $3.11 billion at current forward AUD prices. Net capital expenditure is expected to be $3.0 billion for FY18 and FY19 combined, and impact of inflation on costs, including wage growth is expected to be $250 million. Gross benefits from the next wave of ongoing transformation (including cost, revenue and fuel efficiency improvements) are expected to be $400 million per year. QAN stock moved up 3.8% on August 25, 2017. Given the increasing competition in the industry and current trading levels, we maintain an “Expensive” recommendation on the stock at the current price of $ 6.02

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.