Monadelphous Group Limited

MND Details

2019 AGM to be held in November: Monadelphous Group Limited (ASX: MND) is in the provisioning of engineering services in Australia. The market capitalisation of the company stood at A$1.45 Bn as on 30^th October 2019. The company recently announced that it would be holding its 2019 Annual General Meeting on 19^th November 2019. For the year ended 30^th June 2019, the revenue amounted to $1.608 Bn, which were in accordance with the guidance provided to the market. It posted an underlying net profit after tax for FY19 of $57.4 million. MND added that the results represent significant growth in its Maintenance and Industrial Services division and in its water and renewable energy businesses, and the reduction in resources construction activity levels which were foreshadowed at the end of the previous year. The Board of MND declared a final dividend of 23 cps. This brings the full-year dividend to 48 cps fully franked, giving a dividend payout ratio of around 90% of the reported net profit after tax.


Revenue by Division (Source: Company Reports)

What to Expect:The company stated that the resources and energy sector in Australia is anticipated to provide a solid pipeline of opportunities in upcoming years as more favourable market conditions return. The company anticipates that the LNG prospects might be positive over the coming years, and maintenance activity is also expected to be strong.

Stock Recommendation:The return on equity of the company stood at 12.8% in FY19 as compared to the industry median of 9.9%. This implies that the company has provided decent returns to the shareholders against the broader industry. On the valuation front, MND is trading at EV to sales multiple of 0.8x against the industry median of 1.6x on TTM basis. On the stock’s performance front, it produced a return of 12.75% on a YTD basis. Hence, considering the price movement in the recent past, outlook and valuation parameters, we give a “Buy” recommendation on the stock at the current market price of A$15.390 per share on 30^th October 2019.

 
MND Daily Technical Chart (Source: Thomson Reuters)
 

Vicinity Centres

VCX Details

A Quick Look at Sep 2019 Quarter:Vicinity Centres (ASX: VCX) is in investment, management, and development of the property. It is also involved in leasing and funds management. It has a market capitalisation of A$10.19 Bn as on 30^th October 2019. The company through a release dated 29^th October 2019 announced that it has priced €500 million of 10-year fixed rate medium term notes under its European Medium-Term Note (or MTN) programme. It added that the settlement of the senior and unsecured Notes is anticipated to occur on 7 November 2019, subject to satisfaction of customary conditions precedent. The company recently released its results for the September 2019 quarter, wherein it stated that there was a rise of 2.6% in total portfolio MAT (moving annual turnover). This was supported by a solid specialty store, and mini majors combined sales growth of 3.0% and increased sales of 2.9% from the DDS category.

The company stated that, for FY19, the distribution per security stood at 15.9 cents against 16.3 cents in the prior year. It added that this decrease is primarily because of the impact of asset divestments over the past two years and reflects an adjusted FFO payout ratio of 99.8%. The final distribution for the six months ended 30 June 2019 was 7.95 cps.

Future Aspects:For FY20, the company is expecting FFO in the range of 17.8 to 18.0 cents per security, implying comparable growth of 1.7% to 2.9%. The distribution payout ratio is anticipated to be at the upper end of the target range of 95% to 100% of AFFO and reflects FY20 maintenance capital expenditure and incentives of around $80 Mn to $90 Mn.


FY20 FFO per Security Guidance (Source: Company Reports)

Stock Recommendation:The company’s Debt/Equity ratio stood at 0.40x in FY 2019, which was marginally lower than the industry median figure of 0.41x and, therefore, it can be said that VCX’s balance sheet is more stable as compared to broader industry. On the stock’s performance front, it produced returns of 5.45% and 5.04% in the time frame of one month and three months, respectively.

Considering the stable balance sheet and decent returns, we maintain a “Hold” rating on the stock at the current market price of A$2.660 per share, down 1.845% on 30^th October 2019.


 VCX Daily Technical Chart (Source: Thomson Reuters)
 

Cromwell Property Group

CMW Details

CMW Met Distribution Guidance:Cromwell Property Group (ASX: CMW) is an internally managed Australian REIT and a property fund manager. The market capitalisation of the company stood at A$3.43 Bn as on 30^th October 2019. The company recently noted that ARA Real Estate Investors XXI Pte. Ltd. has obtained regulatory relief to be able to acquire Cromwell stapled securities under the ‘creep exception’ of the Corporations Act 2001 (Cth) as if ARA had not been diluted by Cromwell’s institutional placement of the stapled securities in the month of July 2019. In another update, the company announced that it has inked formal binding agreements to acquire all third-party investor interests in the Cromwell Polish Retail Fund as part of its ‘Invest to Manage’ strategy.

The company would be conducting its 2019 Annual General Meeting on 28^th November 2019. When it comes to financial performance, it reported FY19 statutory profit amounting to $159.9 Mn as compared to $204.1 Mn in FY18. The operating profit after finance costs of funds and asset management segment stood at $28.5 Mn for the period.

In FY19, the company met its guidance of distributions per security of 7.25 cents per share. At the current market price of A$1.320 per share, the annual dividend yield of the company stood at 5.54%, which is higher than the industry average (Financials) of 4.6%.

 
FY19 Performance (Source: Company Reports)

Future Guidance:The company’s focus remains on continuing the execution of its ‘Invest to Manage’ strategy, asset recycling, and value-add development opportunities. The company affirmed operating profit at the upper end of previous guidance at 8.30 cps and distributions at 7.50 cps for FY20.

Stock Recommendation:As per the ASX, the stock of CMW is trading at a price to earnings multiple of 17.530x as compared to the industry median of 18.4x on TTM basis. The stock is available at a price to cash flow multiple of 18.5x against the industry median of 19.9x. On the stock’s performance front, it produced returns of 10.92% and 16.81% in the time period of three months and six months, respectively. Thus, considering reasonable valuation parameters and respectable dividend yield along with above mentioned facts, we give a “Hold” stance on the stock at the current market price of A$1.320 per share on 30^th October 2019.

 
CMW Daily Technical Chart (Source: Thomson Reuters) 
 
 

Estia Health Limited

EHE Details

Strong Operating Cash Flow Conversion:Estia Health Limited (ASX: EHE) is in the provisioning of services in residential aged care homes in Australia. The market capitalisation of the company stood at A$738.88 Mn as on 30^th October 2019.The company recently announced that it would be conducting its 2019 Annual General Meeting on 6^th November 2019. The company reported FY19 EBITDA amounting to $94.0 million, reflecting a rise of 4.3% over FY18, during a challenging 12 months for residential aged care. The company has a strong operating cash flow conversion of around 100% of EBITDA to cash kept bank debt levels well within the target range and enabled the funding of dividends and capital investment. The company declared a fully franked final dividend of 7.8 cps, which brought the full-year dividend to 15.8 cps, fully franked, and reflected a payout ratio of around 100% of NPAT for FY19.


Summary P&L (Source: Company Reports)

Future Prospects:The company continues to refine its strategy and focus in relation to occupancy, which would become increasingly important in an environment of heightened competition, and increased customer expectations. It is well prepared for new quality standards, with investment in increasing resident amenity and improvements in quality and safety systems.

Stock Recommendation:As of 30 June 2019, the net bank debt stood at $110.4 Mn, which resulted in a bank debt gearing ratio of 1.3x EBITDA. EHE has total debt facilities of $330.0 Mn, of which over $201.0 million were undrawn. On the valuation front, the stock of EHE is trading at EV to EBITDA multiple of 9.1x in comparison to the industry average of 8.1x on TTM basis. As per the ASX, the stock of EHE is trading towards its 52-week high levels. Hence, we have a watch stance on the stock at the current market price of A$2.820 per share, down 0.353% on 30^th October 2019.

 
EHE Daily Technical Chart (Source: Thomson Reuters)

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