Stocks’ Details

Macquarie Group Limited

Performance to Decline Slightly in FY20: Macquarie Group Limited (ASX: MQG) is engaged in the provision of banking, financial, advisory, investment and funds management services. The company recently updated that it has become a substantial shareholder of Nufarm Limited with a voting power of 5.08%. In another announcement, the company disclosed about the distribution payment of AUD 1.107800 with dividend distribution rate of 4.4434% per annum for MQGPC - CAP NOTE 3-BBSW+4.00% PERP NON-CUM RED T-12-24 and it will be paid on September 16, 2019 with the record date of September 6, 2019 and ex-date of September 5, 2019.

Financial Highlights of FY19: The company recently reported the results for the financial year 2019. Growth in the financial year 2019 was marked by the diversity of the business. Net Profit for the period amounted to $A2,982 million, up 17% on the previous year. Net operating income witnessed a rise of 17% on pcp at $A12,754 million in FY19. 53% of the group’s FY19 performance was represented by the annuity-style businesses including Macquarie Asset Management, Corporate and Asset Finance, and Banking and Financial Services. These businesses generated a combined net profit amounting to $A3,287 million. Markets-facing businesses generated a net profit contribution of $A 2,858 million.

FY19 Results (Source: Company Reports)

Outlook: On the outlook front, the company expects the overall performance in FY20 to be slightly down on FY19, owing to factors such as market conditions, impact of foreign exchange, potential regulatory changes and tax uncertainties, etc.

Stock Recommendation: The stock of the company yielded returns of 2.32% and 20.21% over a period of 1 month and 6 months, respectively. Despite the strong performance in FY19, the company has expressed an outlook on the performance for FY20, which is expected to be slightly lower than the current year due to certain economic factors such as tax uncertainties and impact of foreign exchange. Currently, the stock is trading slightly above the average of 52 week high and low prices of around $120.07. Moreover, it has a Price/Book multiple of 2.4x, which is higher than the industrymedian of 1.2x. Looking at the future implications of the above factors, we give an “Expensive” recommendation on the stock at a current market price of $126.0 (down 1.045% on 21 June 2019).
 

Brambles Limited

Expected Modest Growth in FY19: Brambles Limited (ASX: BXB) is engaged in the provision of supply chain logistics solutions through CHEP and IFCO segments. It is a leading provider of reusable pallets, crates and containers globally. The company recently updated on the buy-back notice in relation to the on-market buy-back of 4,439,299 shares for a consideration of A$ 56,635,750.89.

The company recently sold its IFCO reusable plastic containers business to Triton and a subsidiary of Abu Dhabi Investment Authority for a value of US$ 2.51 billion. The company will return proceeds to the extent of US$ 1.95 billion to shareholders through pro-rata return of cash and an on-market share buy-back. The remaining value will be utilised to repay a debt to maintain leverage.

Financial Highlights: In the first nine months of FY19, the company reported sales revenue from continuing operations at US$ 3,409 million, up 7% on the prior corresponding period. Sales revenue for CHEP Americas rose by 6%, owing to ongoing expansion and strong price realisation. CHEP EMEA sales grew by 8% on account of net new business wins and price realisation. CHEP Asia-Pacific sales revenue witnessed a rise of 4% driven by like-for-like volume growth and price realisation.

Sales Revenue Data (Source: Company Reports)

Outlook: On the outlook front, the company expects modest growth in the underlying profit for FY19 and an improvement in cash generation in comparison to FY18.

Stock Recommendation: The stock of the company generated positive returns of 28.59% and 43.44% over a period of 6 months and 1-year, respectively. Currently, the stock is trading close to a 52-week high price of $13.155. EV/EBITDA multiple for the company is 10.9x, which is higher than the industry median of 8.4x. The Price Earnings multiple for the company is 23.05x, which is higher than the industry median of 14.1x. Given the backdrop of aforesaid factors, we give an “Expensive” rating on the stock at a current market price of $12.910 (down 0.845% on 21 June 2019).
 

BlueScope Steel Limited

Highest EBIT Growth by North Star Segment: BlueScope Steel Limited (ASX: BSL) is a technology leader and the largest global producer of metal coated and painted steel building products. On 21 June 2019, the company updated that it had bought back a total of 18,310,378 shares for a consideration of $23,25,59,434.18. The company recently executed a sales agreement with NS BlueScope Malaysia for YKGI Holdings Berhad’s manufacturing facility situated in Klang, Malaysia to. The transaction is aimed at the company’s strategy to grow its coated and painted steel business and will provide a cost-effective source of cold rolled feed for supply to NS BlueScope Malaysia.

Financial Highlights: For the first half of the financial year 2019, the company reported a net profit after tax of $624.3 million, up 42% on the prior corresponding period. Underlying NPAT during the period amounted to $613.5 million. Underlying EBIT during the period amounted to $849.6 million, up 62% on pcp. North Star segment reported the highest underlying EBIT growth of 183% at $412 million followed by New Zealand and Pacific Steel EBIT of $72 million, up by 75%. The balance sheet was also robust with great flexibility. As at 31 December 2018, the company reported net cash of $127.5 million.


1HFY19 Financial Highlights (Source: Company Reports)

Outlook: The company expects FY19 underlying EBIT to be approximately 10% higher than FY18.  

Stock Recommendation: The stock of the company generated returns of -3.21% and -12.17% over a period of 1 month and 3 months, respectively. During H1FY19, the company witnessed growth across the key fundamentals including revenue, NPAT and EBIT. The company has been delivering underlying EBIT of over $1.1 billion from the last two financial years and expects even stronger results in FY19. In addition, it is investing well for future growth opportunities in various markets. Overall, the first half of FY19 was the best half on record with strong demand in the U.S. and Australasian markets. Hence, we give a “Buy” recommendation to the stock at a current market price of $12.050 (down 0.083% on 21 June 2019).
 

Evolution Mining Limited

Quarter of Strong Cash Flows: Evolution Mining Limited (ASX: EVN) is engaged in the exploration, mine development, mine operations and the sale of gold/copper concentrate in Australia. The company recently updated that its voting power in Riversgold Limited has been reduced from 18.72% to 15.5%. In another announcement, it updated that JPMorgan Chase & Co. ceased to be a substantial shareholder of the company.

Key Highlights of Quarter Ending 31 March 2019:As per the quarterly report for the period ending 31 March 2019, the company reported Gold Production of 175,901 ounces and a reduction in All-in Sustaining Cost by A$48/oz to A$925 per ounce. During the period, the company commissioned the Cowal Float Tails Leach Project and achieved 4.6% increase in recoveries in the month of March.
 
The company generated strong cash flow during the period with group operating mine cash flow of A$168.3 million. Group net mine cash flow amounted to A$107.8 million. Post payment of dividend, acquisition of stake in Tribune Resources and debt repayments, group cash balance was reported at A$255.9 million.
 

Consolidated Production and Sales Summary (Source: Company Reports)

FY19 Guidance: Production guidance for FY19 is expected to be between 720,000-770,000 ounces at an AISC of A$850 – A$900 per ounce. The production guidance for June 2019 quarter was 190,000 – 195,000 ounces.\

Stock Recommendation: The company’s stock generated returns of 15.28% and 14.67% over a period of 1 month and 3 months, respectively.For 1HFY19, the company had an EBITDA margin of 45.6%, which is higher than the industry median of 34.6%. Net margin for the period was 12%, which is slightly lower than the industry median of 13%. Considering the aforesaid facts and looking at current trading level, we give a “Hold” recommendation on the stock at a current market price of $4.300 (down 2.05% on 21 June 2019).
 

Comparative Price Chart (Source: Thomson Reuters)      

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