Stock’s Details
 

CIMIC Group Limited

New Contract to CPB Contractors: CIMIC Group Limited (ASX: CIM) mainly provides construction, mining and operation as well as maintenance services to the infrastructure sector. The market capitalisation of the company stood at $6.44 Bn as on 10 March 2020. The company has scheduled to conduct its Annual General Meeting for the financial year 2019 on 1^st April 2020. A group company named CPB Contractors, has recently been granted a contract by the Government of South Australia to deliver 3 projects under the Port Wakefield to Port Augusta Regional Projects.

The scope of work includes (1) the Joy Baluch AM Bridge Duplication in Port Augusta, (2) the Port Wakefield Overpass and Highway Duplication, and (3) the Augusta Highway Planning Project located between Port Augusta and Port Wakefield. There would be a strategic alliance between the Department of Planning, Transport and Infrastructure, Aurecon Australasia and GHD for completing the projects. Moreover, these projects would generate revenue of circa $236.8 million.  The below picture gives an overview of the financial performance of FY19:


Financial Performance (Source: Company Reports)

Optimistic about Outlook: Subject to market conditions, the company is expecting NPAT for FY20 in the ambit of $810 million-$850 million. CIMIC is optimistic about its outlook throughout core markets.

Valuation Methodology: P/E Multiple Based Relative Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: During FY19, the company has returned an amount of $526 million to shareholders in the form of dividends and share buyback. The company is focused on generating cash, sustaining a strong balance sheet and adopts a rigorous approach to tendering and project delivery. We have valued the stock using P/E based relative valuation approach and, for the purpose, we have taken peers such as Downer EDI Ltd (ASX: DOW), Boral Ltd (ASX: BLD) and Decmil Group Ltd (ASX: DCG). We have arrived at a target price, which is offering an upside of higher single-digit (in percentage terms). Hence, considering the decent returns to shareholders, pipeline of contracts to group companies and positive outlook, we give a “Buy” recommendation on the stock at the current market price of $20.50 per share, up by 3.119% on 10 March 2020.
 

Monadelphous Group Limited

Decent Performance in 1H FY20: Monadelphous Group Limited (ASX: MND) is engaged in the provision of engineering services within Australia, and the market capitalisation stood at $1.13 Bn as on 10 March 2020. On 7 March 2020, the company informed the market about an accident that took place in in Kalgoorlie, which caused in an employee fatality.
 
1HFY20 Key Highlights: Strong performance in the Maintenance and Industrial Services division during 1H FY20 has resulted in the revenue of $852 million, reflecting a rise of 2.6%. Moreover, the revenue of this division amounted to $584.5 million with an increase of ~16%. Net profit after tax for the period stood at $28.5 million with a drop of 7.4% due to lower revenue contribution from construction work, and a rise in the depreciation and financing charges.
 

Financial Highlights (Source: Company Reports)

Pipeline of Opportunities: The company anticipates a solid pipeline of opportunities within the resources and energy sectors from favourable market conditions in the upcoming years. Monadelphous anticipates robust demand for maintenance services on the back of record production levels in the oil and gas sectors.

Valuation Methodology:EV/Sales Multiple Based Relative Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:For 1HFY20, MND declared a fully franked dividend amounting to 22 cents per share. It secured $850 million of new contracts and contract extensions, which might help the company in gaining traction in the industry. We have valued the stock using EV/Sales based relative valuation approach and, for the purpose, we have taken peers such as Worley Ltd (ASX: WOR), Downer EDI Ltd (ASX: DOW), NRW Holdings Ltd (ASX: NWH) etc. As a result, we have arrived at a target price with an upside of lower double digit (in percentage terms). Therefore, in light of new contracts and contracts extensions and decent performance in 1H FY20, we give a “Buy” recommendation on the stock at the current market price of $12.85 per share, up by 7.712% on 10 March 2020.

Tabcorp Holdings Limited

Diversified Businesses Supported Revenue Growth: Tabcorp Holdings Limited (ASX: TAH) is involved in the provision of gambling and other entertainment services. The market capitalisation of Tabcorp stood at $6.83 Bn as on 10 March 2020. As per a recent announcement, the company informed about the retirement of Ziggy Switkowski AO, from the post of Non-Executive director, effective 28^th February 2020.The company experienced a solid result in 1H FY20, which was underpinned by diversified businesses of the Group. Its revenue went up by 4.4% to $2,913.9 million in an environment of soft discretionary spending. Group’s strong results were also supported by the performance of the Lotteries & Keno division, wherein digital turnover of Lotteries witnessed a rise of almost 40%.  The company declared an interim dividend of 11 cents per share (fully franked) for 1HFY20. 

 

Group Results (Source: Company Reports)

Expected EBITDA Benefits: The company is in the last phase of Tabcorp-Tatts integration and expects EBITDA synergies and business improvements for FY21 in the range of $130 million - $145 million. However, for FY20, it targets EBITDA benefits of $100 million.  

Valuation Methodology:P/CF Multiple Based Relative Valuation

P/CF Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company would continue to cement its unique omni-channel model, along with investments in personalisation, product innovation, digital capability as well as retail modernisation. We have valued the stock using P/CF based relative valuation approach and, for the purpose, we have taken peers such as Aristocrat Leisure Ltd (ASX: ALL), Crown Resorts Ltd (ASX: CWN), Skycity Entertainment Group Ltd (ASX: SKC) etc. As a result, we have arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, taking the decent growth in 1HFY20 and expected EBITDA benefits by the integration of Tabcorp-Tatts into account, we give a “Buy” recommendation on the stock at the current market price of $3.390 per share, down by 0.593% on 10 March 2020.

Nine Entertainment Co. Holdings Limited

Robust Growth in Digital Video Business: Nine Entertainment Co. Holdings Limited (ASX: NEC) is a media and entertainment company with a market capitalisation of $2.22 Bn as on 10 March 2020. For 1H FY20, the group reported revenue amounting to $1.2 Bn with EBITDA of ~$251 million, and a net profit after tax of ~$114 million on a statutory basis, pre-Specific Items. Nine experienced robust growth from digital video businesses with an improvement of $35 million in EBITDA at Stan, where subscriber surpassed 1.8 million. It reported earnings per share from continuing business, pre-Specific Items, at 6.2 cents, and declared an interim dividend of 5.0 cents, fully franked.


Statutory Results (Source: Company Reports)

What to Expect: The company expects March quarter FTA revenues to be broadly flat. Nine anticipates continued growth at 9Now, where growth in EBITDA is likely to be tempered by increased investment in content, as the business expands into the broader digital video market. 

Valuation Methodology: P/E Multiple Based Relative Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: During 1H FY20, the company invested in technology via 9Galaxy which will enable seamless trade of inventory, and in a premium content mix which works across linear and on-demand television. We have valued the stock using P/E based relative valuation approach and arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, considering the growth prospects, investment in 1HFY20 and robust revenue growth, we give a “Buy” recommendation on the stock at the current market price of $1.410 per share, up by 8.462% on 10 March 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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