Xero 

XRO Details

Positive Outlook Ahead:Xero Limited’s (ASX: XRO) stock climbed up 3.22 percent on September 10, 2018, owing to positive market sentiments in relation to outlook ahead of the company. Recently, the group delivered another impressive set of results in the year to 31 March in which the group recorded its first positive annual EBITDA of $26.0 Mn compared to ($28.6) Mn loss in FY17 and has grown well in FY18 with the addition of 351,000 subscribers. As of now, the group enjoys a decent cash position of $20.95 Mn with virtual debt-free status as of March 31, 2018. In addition, during the last year, the group transitioned to a sole listing on the ASX and was included in the S&P/ASX 100 index. This was a significant step forward in positioning Xero to fulfill its long-term growth ambitions by giving the company access to deeper pools of capital and creating more opportunity for large international investors to become shareholders. During the year, the group increased its footprints in Australia, New Zealand, and the United Kingdom, and continued to grow its presence in the Americas, South East Asia, and South Africa regions. We expect that the company will continue to maintain its financial discipline while pursuing the significant growth opportunities.


Strengthening global footprint (Source: Company Reports)

In the meantime, the stock has risen 45.55 percent in the past six months as on September 07, 2018 and traded close to a 52-week high of $52.570. Based on foregoing, we maintain our “Hold” recommendation on the stock at the current market price of $47.760.


XRO Daily Chart (Source: Thomson Reuters)
 

Aristocrat Leisure 

ALL Details

Rising market share in the North American region: Aristocrat Leisure Limited’s (ASX: ALL) stock climbed up 1.351 percent on September 10, 2018 at the back of positive market sentiments as the investors assume that the group is consistently increasing its market share in North American gaming operations and is growing well in the flat market. The company has significantly risen its digital segment in 1HFY18 and recorded a 230.6% increase in revenue to $428.5 million as compared to prior corresponding period. On the other hand, EBITDA margin and NPAT margin contracted by 144 bps and 140 bps to 39.2% and 18.9%, respectively in 1HFY18 against the prior corresponding period. On the balance sheet front, Net Debt- to- EBITDA ratio came in at 2.0x in 1HFY18, representing heavily burdened position with debt and the group may take some time to pay off its debt.


Balance Sheet and Debt Profile (Source: Company Reports)

On the other hand, the group confirmed that it expects double-digit NPATA growth to continue in FY18 compared to FY17. In addition to this, the group expects a 300 bps reduction in its effective tax rate in FY18 against the previous year. Meanwhile, the share price has risen 25.21 percent in the past six months (as at September 07, 2018) and traded at high PE level (37.56x) among its peer group and the stock seems to be overvalued at the current price. Hence, we maintain our “Expensive” recommendation on the stock at the current price of $30.00.


 
ALL Daily Chart (Source: Thomson Reuters)
 

Cochlear

COH Details

New and existing products support growth path ahead: Cochlear Limited (ASX: COH) posted an increase of 9% in the sales revenue of $1351.4 million and a 10% increase in net profit attributable to members at $245.8 million for FY18. Earnings per share also came in higher at $4.27 per share compared to $3.90 per share in FY17. Major revenue drivers were new products, growth in the existing products, and improvements in the service offering to its customers. Net Profit after tax and Earnings per share witnessed consistent growth over two decades. We expect that the company will continue to execute on its business strategy of investing to retain market leadership and drive market growth.

The Group’s free cash flow was reported at A$ 202.7 Mn in FY18, an increase of 63.2% from A$124.2 Mn reported in FY17. EBIT margin was up 32bps in FY18 at 25.8% compared to 25.5% in FY17. As a result, the Board of Directors declared fully franked final dividend of $1.60 per share for its shareholders and it will be payable on October 10, 2018 with the record date of September 18, 2018. This summarized a total dividend payment of $3.00 per share for the full year, representing 11% rise over the previous year. As of now, the company aims to maintain its healthy balance sheet position and continues to target a dividend payout of 70% of net profit in years to come.
 

Revenue and Net profit Trend (Source: Company Reports)

On the other hand, the non-executive director Prof Edward Byrne, AC has an intention to retire from the Company’s board at the end of the next Annual General Meeting which will be held on 16 October 2018.Meanwhile, the share price has risen 12.86% in the past six months as at September 07, 2018 and traded at higher PE level of 48.29x. Hence, we maintain our “Expensive” recommendation on the stock at the current market price of $ 206.460.


 
COH Daily Chart (Source: Thomson Reuters)
 

Baby Bunting Group 

BBN Details

Growth from Network enhancement: Baby Bunting Group Limited’s (ASX: BBN) stock tumbled 2.066 percent on September 10, 2019 ahead of dividend payment due on September 14, 2018. Recently, the group has issued 200,000 Share Rights to its existing shareholders which is subject to the terms and conditions of the Long-Term Incentive Plan, as described in the 2018 Remuneration Report. Additionally, half of the Share Rights will be subject to the absolute EPS growth performance condition and the other half will be subject to the absolute total shareholder return (TSR) growth performance condition.

On the other hand, after the first 6 weeks of trading in FY19 (to 5 August), total sales recorded 16.5% growth on pcp basis and comparable store sales growth came in at 9.8%. It implied gross margin more than 34% in FY19, representing 70 bps against FY18. Moreover, the group forecasts to open 6 new stores in FY19, with scope to add another 4 former TRU-BRU sites in network gaps.

Growth from Network Plan (Source: Company Reports)

Meanwhile, the share price has risen 63.51 percent in the past three months as at September 07, 2018 and traded at a higher level. The stock has a market capitalization of circa $304.87 Mnand a beta of 0.64x (as of September 10, 2018), with less volatility than the market. Hence, we give a “Buy” recommendation on the stock at the current market price of $2.370, considering aforesaid facts.


 
BBN Daily Chart (Source: Thomson Reuters)  
 

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