Carsales.Com Ltd

CAR Details

Growing international opportunity: Carsales.Com Ltd (ASX: CAR) delivered an overall company revenue rise of 13% (excluding Finance and Related Services segment) while their EBITDA enhanced 7%. Their Domestic Private business continued to perform strong wherein the revenues surged 27% driven by adjacent markets, especially tyresales and RedBook Inspect. Core dealers and display products with new premium products continued to show strength. Stratton Finance returned to growth during the fourth quarter in line with prior corresponding period.



International opportunity for Carsales.Com (Source: Company reports)

Meanwhile, Carsales.Com continues to focus on their international opportunity which is showing momentum given the ongoing growth in SK Encar wherein the underlying revenue surged 29%. Webmotors’ second half of 2017 underlying revenue and EBITDA rose 15% and 44%, respectively. The group’s domestic core business performance in July continued its positive momentum while they expect a similar trend going forward. As per their international segments’ outlook, SK Encar is expected to see an ongoing growth with improving signs regarding macroeconomic conditions in Brazil. The group forecasts ongoing integration of their core carsales IP and technology into Chilean, Mexican and Argentinian businesses. Given these positive drivers, the shares of Carsales.Com generated over 20% in the last six months placing them at higher levels (as at October 13, 2017). However, the growth prospect now looks muted at a relatively high price to earnings scenario. We give a “Sell” recommendation on the stock at the current price of $ 13.39



CAR Daily Chart (Source: Thomson Reuters) 

SEEK Ltd

SEK Details

Trading at higher levels: SEEK Ltd (ASX: SEK) had recently received over cUS$176 million related to the Zhaopin transaction. Meanwhile, the group’s underlying NPAT surged 11% in FY17 while dividends rose 10% year on year (yoy) to 44 cents. The group is a clear market leader with 36% share of placements, which is leading by c9x times as compared to their nearest competitor. Their Asian division started showing reinvestment benefits, while the overall economic condition in the region is showing improvement. Further, the group’s Online Education Services showed strength in student outcomes. Given the scenario, the shares of SEK surged over 17.5% in this year to date (as of October 13, 2017) placing them at higher levels. The higher valuation given the price to earnings scenario, a subjective growth visibility with competitors bringing disruptive technologies, and recent costs and investments for the group indicate for leveraging the opportunity to book profits in the stock. We give the stock a “Sell” recommendation at the current price of $ 17.85



SEK Daily Chart (Source: Thomson Reuters)

Altium Ltd

ALU Details

Challenges driven by rising competition: Altium Ltd (ASX: ALU) reported a solid revenue rise of 18% in FY17 while their subscriber seats surged 11% on a yoy basis to 34,522. They sold around 5,500 Altium Designer licenses during the period. Altium is aiming to achieve US$200 million by 2020 while intends to enhance their reported EBITDA margin at 35% or better by 2020.The group continues to look for strategic partnership and M&A opportunities to support their long-term vision of creating a product design and realization platform that is centered on electronics.

Revenue resources (Source: Company reports)

Given their strong performance in FY17 and aggressive long-term targets, the shares of ALU surged over 45% in the last six months (as of October 13, 2017), and are now trading at higher levels. Moreover, despite being a major electronic PCB design software provider, the group faces stiff competition from many new accounting software firms. Given the stock run-up and future scenario, we give a “Sell” recommendation on Altium, at the current price of $ 11.62



ALU Daily Chart (Source: Thomson Reuters)

Domino's Pizza Enterprises Ltd

DMP Details

Improvement in Technology: Domino's Pizza Enterprises Ltd (ASX: DMP) launched a suite of technology and operations improvements, including a new 360-degree review system to lift Franchisee performance (Operations 360), phase two of DRU Drone deliveries, rostering solution (Tanda), Domino’s Anywhere technology to enable customers to order from anywhere and Hot Lockers to reduce wait times for on-the-go pick-up customers. Moreover, the group also announced their market buy-back of shares up to a maximum aggregate amount of $300 million. On the other hand, the group issued a guidance of 7 to 9% growth in same store sales (SSS) in ANZ, 5-7% in Europe, and 0-2% in Japan for FY18, and this is below the expectation. Moreover, their recent SSS growth is mainly on the back of online sales which came at the expense of offline sales, whose performance was lower in the second half of 2017 as compared to the first half of 2017. Though the company seems to be setting for growth, the stocks still trade at a high level. We maintain our “Expensive” stance on the stock at the current price of $ 49.24



DMP Daily Chart (Source: Thomson Reuters)

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