Tabcorp Holdings Limited

 

TAH Details
 
EBITDA synergies to arise on account of Corporate Restructuring:Tabcorp Holdings Limited (ASX: TAH) stated that the company’s CFO Mr. Damien Johnston has advised that he intends to retire in FY20. The company has commenced a comprehensive search process and also Mr. Johnston has agreed to be with the company until the search process is complete.  Besides this, the company, for 1H FY19, has reported a statutory revenue of $2,787.4 Mn, up 6.1% on pro-forma pcp & an EBITDA before significant items of $554.30 Mn up by 9.0% on the proforma pcp. The group delivered this growth on the back off strong ‘Lotteries & Keno’ performance achieved from the game innovation, as well as digital & retail growth. Moreover, Gaming Services made good progress on contract renewals and new venue sign-ups. Also, the synergies arising from the corporate restructuring and various business improvements initiatives undertaken by it aided the cause.
 
Going forward, the company remains a market leader with a domestic market share of ~84% & 57% in the “Lotteries & Keno” and “wagering & media” segments respectively. Thus, these well-established service segments underpin the stability of earnings. The recent ban on synthetic lottery & keno betting has brought in the much-needed regulatory certainty. Also, the completion of corporate restructuring is expected to create EBITDA synergies ranging $130-$145 Mn with cost synergies upgraded to $95m in FY 21. The revenues will benefit from yield alignment, market expansion, Trackside roll-out & the Keno initiatives undertaken.
 
 
 

 
Australian gambling expenses by product segment (Source: Company Reports)
 
On the valuation front, the company is trading at Price/Book multiple of 1.30x, while the industry median stood at 2.0x. Moreover, the company has provided a dividend yield of 4.48% which is better than industry median of 3.60%. Hence, the stock seems to be trading at attractive prices and looking attractive for accumulation. Meanwhile, the stock has fallen 1.26% in the past six months as on 22 February 2019. Thus, we believe that the company is poised to benefit from the stable regulatory norms as well as the expected synergies due to the corporate restructuring completed by it along with the attractive price to book multiples and higher dividend yield, hence we maintain our “Buy” recommendation on the stock at the current market price of $4.690 (up 2.851% on 22 February 2019).


 
TAH Daily Chart (Source: Thomson Reuters)
 

Transurban Group

TCL Details
 
Constant ADT growth:Transurban Group (ASX: TCL) has recently announced its 1H 2019 results wherein total hike in the average daily traffic (ADT) was recorded at 2.70% as compared to the prior corresponding period. This was due to the large vehicle traffic growth seen in the Melbourne & Brisbane markets. The EBITDA (excluding significant items) was up by 9.80% for the period and rose to the levels of $1,001 Mn. This rise was on the back of increase in toll revenue from existing assets driven by traffic growth in the Australian and North American networks. As regards the outlook for FY19, the management has reaffirmed the distribution guidance at 59.0 cps. The management expects five projects to be completed by FY21 and a further four by FY24, which will be supporting ongoing distribution growth. The company will be focussing upon the priorities to deliver committed projects, maximize performance of operations and enhancing customer and community offerings.
 

TCL’s Financial Highlights (Company Reports)
 
Meanwhile, the stock price has risen 7.68% over the past six months as on 22 February 2019. Hence considering the constant growth seen in the ADT and the decent EBITDA growth, we maintain our “Buy” recommendation on the stock at the current market price of $12.55 (up 1.21% as on 22 February 2019).


 
TCL Daily Chart (Source: Thomson Reuters)
 

James Hardie Industries PLC

JHX Details
 

Decent FY19 outlook:James Hardie Industries PLC (ASX: JHX) has recently posted Q3FY19 performance wherein revenue grew by 18% to $586.2 Mn over the prior corresponding period. It was mainly driven by the acquisition of Fermacell in Europe and higher net sales in the North America Fiber Cement and Asia Pacific Fiber Cement segments. However, adjusted net operating profit came in at US$65.9 million, exhibiting downfall of 10% on PCP basis. It was primarily impacted by the unfavourable movement in asbestos adjustments and higher SG&A expenses, partially offset by a lower loss on early debt extinguishment. As regards the outlook, for the FY ending 31 March 2019, the management expects full-year Adjusted net operating profit to be between US$295 million and US$315 million assuming housing conditions in the United States continue to improve in line with the assumed forecast of new construction starts, input prices remaining consistent and an average USD/AUD exchange rate to remain stable. Management has cautioned that although US housing activity has been improving, market conditions remain a skeptic, and some input costs remain volatile.

JHX’s Financial Highlights (Source: Company Reports)
 
Meanwhile, the stock price has fallen 17.20% in the past six months as on 22 February 2019 and trading at PE multiple of 31.50x. Thus, considering the bleak & skeptic outlook & falling operating profits, the stock will be an interesting one to watch for any potential buying opportunity with more catalysts, if any, that the group may reveal going forward.


JHX Daily Chart (Source: Thomson Reuters)
 

CSL limited

CSL Details
 
Contraction seen in margins: The CSL Limited (ASX: CSL) reported that it will distribute an ordinary dividend of AUD 1.20317500, the record date for which shall be March 14, 2019 and the payment date has been determined to be April 12, 2019.

Also, the company has declared its 1H19 results where it has delivered a double-digit profit growth. It reported sales revenue of $4,581 million, up 11% at constant currency terms on pcp basis. This rise was on the back of Increased usage of immunoglobulin products for chronic therapies, Sales of transformational Hereditary Angioedema (HAE) product and increased sales of adjuvanted influenza vaccine. Further, the company expects that there would be continued demand for plasma and recombinant products. It expects the net profit after tax for FY19 would be in the range of approximately $1,880 to $1,950 million at constant currency. The company expects ~30 to 35 centre openings in FY19.
 


CSL’s Financial Highlights (Source: Company Reports)
 
On the financial metrics front, the company has reported EBITDA margins of 34.50% for the 1HFY19 down from 35.60% reported in pcp. Also, the firm delivered a fall in ROE performance of 26% for the 1H 19 vis-a-vis 31% in the pcp. In the meantime, the stock price has fallen 14.02% in the past six months as on 22 February 2019 and trading towards the 52-week higher level of $232.69. Thus, considering the contraction seen in margins, a decline in the ROE performance, we advise to have a watch stance on the stock at the current market price of $186.50 and wait for a few more trading sessions to get the better levels for entry.


CSL Daily Chart (Source: Thomson Reuters) 

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