BlueScope Steel Ltd

BSL Details

Shares tumbled on increasing energy costs despite strong performance: BlueScope Steel Ltd (ASX: BSL) announced a figure of $715.9 million of reported net profit after tax (NPAT) for FY2017, a 102% increase on FY2016. Underlying NPAT of $650.8 million was 112% higher than FY2016, while Underlying EBIT for the year was $1,105.0 million, or $1,131.2 million (including Taharoa iron sands’ Contribution). The 89% growth in underlying EBIT over FY2016 was generated through delivery of productivity and cost improvements, sales growth, improved steel spreads and the full year benefit of the North Star acquisition. Strategic initiatives implemented in the last two years are delivering strong cash flow as it increased by 17% to $749.3 million for the year.  Further, this allowed the company to increase returns to shareholders during 2HFY2017 through the combination of 4 cents per share interim dividend and a $150 million share buy-back. The company’s net debt was reduced to $232.2 million & finished the year with a leverage multiple of 0.16 times. The Australian steelmaking business is performing well and boosting profitability, supporting the 2015 decision to continue operations at Port Kembla. However, a sharp increase in energy costs for Australian operations risks undermined recent cost and productivity improvements. Combined gas and electricity costs for the company’s major manufacturing sites at Port Kembla, Springhill and Western Port are forecast to increase 75% between FY2016 and FY2018, to an estimated $145M in FY2018. The company is concerned about tightening of supply in the gas and electricity markets, and have highlighted the same to government and regulators, including views about the need for greater supply of gas to domestic customers and incentives to ensure baseload generation are maintained at least at existing levels. The company expects 1H FY2018 underlying EBIT around 80% of 2H FY2017 underlying EBIT (which was $527.3M). BSL’s CEO Paul O’Malley is also ending his 12 year tenure at the end of the year. The stock has moved up more than 75% in the past one year but fell over 21% on August 21, 2017 at the back of the latest updates. We give an “Expensive” recommendation at the current price of $ 11.03

Vocus Group Ltd

VOC Details

Termination of sale transaction discussions: In June 2017, Vocus Group Ltd (ASX: VOC) had received a preliminary, indicative and non-binding proposal from Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, KKR) to acquire 100% of the shares in Vocus (on a fully diluted basis) at a price of $3.50 cash per share, via a scheme of arrangement. Further, it announced in July 2017 that it had received an additional preliminary, indicative and non-binding proposal from Affinity Equity Partners (S) Pte Ltd and its affiliates (Affinity) to acquire all the shares in the Company at a price of $3.50 cash per share, via a scheme of arrangement. Throughout the due diligence process the Bidders indicated support for management’s strategic plans and transformation program. However, the Bidders have now advised that they are unable to support a transaction on terms acceptable to the Board and, accordingly all discussions have ceased. This led to the stock price fall of over 14.6% on August 21, 2017.

An important factor in the Board’s determination to conclude the sale process is the Company’s FY18 outlook which forecasts further revenue growth to between $1.9bn and $2bn and underlying EBITDA growth to between $370m - $390m. Importantly, this forecasted growth is despite the headwinds created by the deferred subscriber acquisition cost benefit to EBITDA of approximately $41m in FY17. We maintain a “Hold” recommendation on the stock at the current price of $ 2.75

NIB Holdings Ltd

NHF Details

Outstanding performance by Australian Residents Health Insurance (arhi) business:NIB holdings Ltd (ASX: NHF) witnessed a stock price fall of 3.3% on August 21, 2017 despite posting a 16.4% yoy (year on year) growth in full year underlying operating profit (UOP) at $153.7 million for FY17. Net profit after tax (NPAT) grew 30.9% to $120.2 million and earnings per share (EPS) increased by 28.3% to 27.2 cents per share. Moreover, Australian Residents Health Insurance (arhi) business witnessed an outstanding performance, with UOP up 13.2% to $107.0 million.Despite weak market conditions and affordability pressures, arhi still added in net terms 20,204 policyholders at a growth rate of 3.8%, which was almost four-times the industry rate. Notably, NIB accounted for more than 30% of the entire industry net policyholder growth for the year.

The company’s NPS (Net Promoter Score) increased to 23.2% compared to 17.7% of the previous year. Further, NIB’s adjacent businesses which include international workers and students, nib New Zealand and travel insurance distributor, the World Nomads Group continued to perform strongly and earnings from these businesses accounted for more than 30% of Group earnings, up from 28.4% last year and accounted for more than 40% of FY17 Group earnings accretion. NIB's international students and workers business reported organic growth of 28.5% which lifted UOP by 47.7% to $25.4 million. Likewise, New Zealand premium revenue grew by 14.9% to $199.3 and improved UOP by more than 35% to $23.5 million. Importantly, over half of sales were made through nib’s new direct to consumer channel which is new to the market landscape. The company expects FY18 UOP to be at least $150 million (statutory operating profit of at least $141 million) and investment income in line with internal benchmarks.  The stock rallied over 26.6 % in the last one year (as of August 21, 2017) and is trading at high levels. We maintain an “Expensive” recommendation on the stock at the current price of $ 5.85

Monash IVF Group Ltd

MVF Details

Subdued earnings growth: Monash IVF Group Ltd.’s (ASX: MVF) stock lost about 8.6% on August 21, 2017 at the back of FY17 result announcement. MVF recorded a trivial increase of 2.9% in reported net profit after tax (NPAT) to $29.6m whilst group revenues were 0.9% down at $155.2m for the year ended 30 June 2017 (FY17). The company delivered subdued earnings growth in FY17 due to a decline in patient treatments and associated revenues against strong comparative volume growth in the pcp. MVF continues to focus on developing industry leading science and technology in the assisted reproductive services and broader women’s health sector. Moreover, this focus is the foundation for the group’s strategic market positioning as the leading premium service provider in the Assisted Reproductive Services (ARS) sector.


Financial summary; (Source: Company reports)

The KL Fertility business in Malaysia continued to deliver strong growth in Patient Treatments with 10.1% yoy growth during FY17. EBITDA increased to $2.5m (FY16: $2.4m) as the benefits of strong volume growth were offset by a weakening currency and the upfront investment to support the transition to a new state of the art purpose built clinic and day surgery to accommodate demand growth experienced in Malaysia. The transition to the new clinic was completed in May 2017 with positive initial feedback from patients and strong volume growth on pcp. The company expects the reported FY18 NPAT to be broadly in line with FY17, with market growth initiatives, effective cost control, and well-developed patient transition strategies, offsetting any downside risk of a doctor departure in Victoria. We maintain a “Hold” recommendation on the stock at the current price of $ 1.52

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