Stock’s Details

Flight Centre Travel Group Ltd

Challenging Environment in Australian Leisure Segment & Trend Is Expected to Prevail: Flight Centre Travel Group Ltd (ASX: FLT), leading travel company that has prominence in Australia, NZ & South Africa, and operates in more than 22 countries. FLT’s stock has risen 2.20% in the past three months. FLT is performing strongly in the US, UK, and Asia market. In April, FLT had acquired a 25% interest in The Upside Travel Company. Through this investment, FLT became Upside’s largest individual shareholder and gained access to the travel technology platform and software development resources that will enhance its already strong SME offering that it predominantly delivers through the Corporate Traveller brand. The following picture gives an idea of FLT’s core businesses:


Core Businesses (Source: Company Reports)
 
Initially, FLT had a 25% stake in 3Mundi corporate travel business who has a presence in France and Switzerland and has recently acquired 75% stake in the business.As a result, the company now has 100% ownership in 3Mundi corporate travel business. As of result of this deal, FLT will have a stronger corporate network and an even more powerful proposition for French and Swiss customers and for global customers who travel to and transact in the key markets of France and Switzerland.
 
What to Expect: The company expects the underlying profit before tax for FY 19, that ends in June 30, 2019, would be in the range of $335 million and $360 million. This is significantly below the earlier forecast of between $390 million-$420 million. The mid-point of updated forecasts is $347.5million, reflects that there will be a decline of almost 10% from FY 18 underlying profit before tax performance of $384.7million. Further, the company anticipates that the “Other” segment losses will rise during the second half of FY 19 on the back of decline in the income from interest, rise in payments of the interest, cash payment of total amount of $211 million for paying fully franked dividends, increase in expenses for implementing global technology, costs associated with mergers & acquisition and additional costs related with consultant fees and redundancy payments.
 
Stock Recommendation: The company’s net margin stood at 5.8% in 1H FY 2019 and its gross margin was 93.6%. The company’s current ratio stood at 1.52x in 1H FY 2019, which can be considered at decent levels. In the span of the previous one year, the stock price of the company has fallen -30.24% as at 15 July 2019. As per ASX, the stock is presently trading closer to its 52-week low level of $37.59 with PE multiple of 18.11x and an annual dividend yield of 3.79%. Based on the mixed scenario, we have a wait and watch stance on the stock at the current market price of A$43.450 per share (down 1.563% on 16 July 2019).
 

Reece Ltd

US & New Zealand Presence Growing & Strong Performance in First Half Of 2019: Reece Ltd (ASX: REH), for the first half of FY 19, has reported 104% growth in the net sales to $2,718.2 Mn. The company during 1H 2019 delivered 45% increase in the Normalised Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) to $260.1 Mn driven by the strong performance of the underlying business, contribution from the newly acquired MORSCO and investments.
 

1H FY 19 Financial Performance (Source: Company Reports)

However, the company posted 8% decline in the Statutory NPAT to $97.8 Mn during the first half of FY 19 on the back of a rise in the one-off costs related to the acquisition. The company reported 20% growth in Normalised NPAT (excluding the costs related to the acquisition) for the first half of FY 19 to $127.0 million.
 
What to Expect From REH: The company stated that they are observing more moderate growth in the residential building market in Australia, while non-residential commencements remain strong. For the second half of 2019, the company expects to invest in customer experience in Australia & New Zealand. It would also build a long-term strategy for MORSCO. In the first half, the company had welcomed 20 new branches to Australia and New Zealand network via organic and acquisition growth. In the US, MORSCO opened 2 new outlets in the Sun-Belt region.
 
Stock Recommendation: The company’s net margin stood at 3.6% in 1H FY 2019 while, during the same period, its gross margin stood at 28.4%. The company’s stock has delivered the return of 1.29% in the span of the previous three months while, in the time frame of the past one month, the return stood at -1.55%. This reflects that the stock is quite volatile. Hence, considering the aforesaid facts and volatility in the stock, we have a wait and watch stance on the stock at the current market price of A$10.110 per share (down 0.394% on July 16, 2019). 
 

WAM Research Limited

Investment Portfolio increased 14.5% in the last 6-months: WAM Research Limited (ASX: WAX) invests in small and mid-cap companies listed in Australia. WAX has recently released its investment performance of June month wherein the investment portfolio of the company decreased by 0.5% in the month of June 2019, underperforming the benchmark S&P/ASX All Ordinaries Accumulation Index which had given the return of 3.4%.
 

Performance at the end of 30 June 2019 (Source: Company Reports)
 
Investment Type: The portfolio comprised of 74.6% in listed equities and 25.4% in fixed interest and cash.

A detractor to the portfolio during the month was Vocus Group Limited (ASX: VOC)which lost ~28.8% in June 2019. The stock was selected to include in the portfolio due to the appointment of its new CEO Kevin Russell and his turnaround strategy. Swedish private equity firm EQT Infrastructure and AGL Energy, both walked away from non-binding takeover proposals during the due diligence process. This was the fourth time when VOC has had a prospective buyer rescind an offer in less than two years.
 
On the other hand, Codan Limited (ASX: CDA) stood out as a major contributorand supporter to the portfolio. CDA is an Adelaide-based communication, metal detection and mining technology manufacturer and supplier. The company has opted for the investment purpose due to the better than expected results for FY18. CDA, at the end of May, communicated that sales in the second half of the year had delivered a positive earnings surprise. The company ended up the month of June with a gain of 6.1%. Net Tangible Assets (NTA), before tax came in at 118.12 cents whereas NTA after tax stood at 116.11 cents at the end of June 2019. Gross assets for the portfolio stood at $226.2 million at the end of June 2019 as compared to $227.6 million in May 2019.
 
1H19 Performance: WAX for the first half of 2019 had reported a decline of 217% in revenue to $26,006,766. On the same line, bottom-line posted a loss of $18,573,126 in the period.
 
Stock Recommendation: The stock has generated negative returns of 8.79% in the last 1-year. With an annual dividend yield of 6.86%, the stock is trading toward the lower end of its 52-week range. Considering the quality of stocks, higher NTA, a balanced approach towards different asset classes distribution coupled with the underperformance of stock price, etc, we recommend a “Speculative Buy” rating on the stock at the current market price of $1.390, up 0.725% as on 16 July 2019.
 
 

WAM Capital Limited

Investment portfolio up 12.4% in Last 6-months: WAM Capital Limited (ASX: WAM) invests in small and mid-cap companies listed in Australia.
 
The portfolio gained 0.7% in the month of June, however, underperformed the S&P/ASX All Ordinaries Accumulation Index. The portfolio comprised 80.3% listed equities and 19.7% fixed interest & cash at the end of June 2019 as compared to 75.5% & 25.3%, respectively, at the end of May 2019. Market capitalisation of the portfolio stood at $1,499.7 million at the end of the period.


Portfolio Performance at the end of June 2019 (Source: Company Reports)
 
Pre-tax net tangible assets stood at 184.10 cents whereas post-tax net tangible assets came in at 187.08 cents.
 
Codan Limited (ASX: CDA) proved to be a research driven portion of the investment portfoliowith a gain of 6.1% during the month. Ausdrill Limited (ASX: ASL), a market driven portion of the portfolio, closed up 24.6% for the month. ASL is a diversified mining services company, operating in Australia, Africa, India and the United Kingdom.

Out of the top 20 holdings of the portfolio,the five names are Afterpay Touch Group Limited, Austal Limited, Automotive Holdings Group Limited, Cleanaway Waste Management Limited, Collins Foods Limited, etc. For the first half of 2019, the company reported 198.6% fall in the revenue to $129,735,505 and 204% fall in the bottom line which posted a loss of $91,478,039.
 
Stock Recommendation: The stock has risen 7.21% in the last three months. At the current market price of $2.210, an annual dividend yield for the stock stands at 6.95%. With the compelling fundamentals of the stocks in the portfolio, decent dividend yield, and NTA, etc., we recommend a “Buy” rating on the stock at the current market price of $2.210, up 0.913% as on 16 July 2019.
 

Comparative Price Chart (Source: Thomson Reuters) 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.