Stocks’ Details

Webjet Limited

Expansion in Pacific Region with Three Key Appointments: Webjet Limited (ASX: WEB) is the world’s second largest B2B accommodation provider and has taken another significant step forward in its global expansion by recruiting three senior and well-known executives to lead its operations in the Pacific region. The company, which operates the JacTravel, Sunhotels, Lots of Hotels, totalstay, and FITRuums brands, has designated John Stucci as a President for the Pacific region. In addition to this, Grant Sumich has been appointed as a Head of Commercial - Pacific and Anthony Rumpel as a Hotel Procurement Manager - Pacific. All three senior leaders will be based in Sydney. In our view, these appointments will support to meet the company growth target.This includes discovering a world of opportunities by partnering with WebBeds Pacific, including access to exclusive agent rates, benefits, and educational opportunities. Moreover, they will lead a talented team and provide guidance to employees and grow the business by providing valuable strategic advice, along with industry insights and contacts to the Company during its ambitious growth phase.

Moreover, the stock is currently trading at P/E multiple of 40.03x which is significantly higher than the peers signaling that the company (with the market capitalization of $1.73 billion) might be overvalued at the current juncture. From the analysis standpoint, gross margin, operating margin, and Net Margin in FY18 have come down drastically at 38.3%, 8.8%, and 5.4% compared to 93.3%, 28.9%, and 25.9%, respectively in FY17, indicating the inefficiency of the company to translate their revenue into Profit. Based on FY18 performance, Return on Equity has also come at the lowest in five years at 12.6% compared to 28.6% in the previous year. Based on foregoing, we believe that the stock is overvalued at the current market of $14.10 and might correct in the near term. Hence, this stock is close watch.

Crown Resorts Limited

Capital Management: Crown Resorts Limited (ASX: CWN) has updated the market about the progress on several transactions under its ongoing buy-back event. The group indicated to buy back shares with an aggregate total consideration of $400 million. As of now, the group has bought back a total of 70,88,496 shares via on-market trade for the total consideration of $ 9,40,46,528.13. Besides this, the group has bought back approximately 1.34 million Subordinated Notes listed on the ASX under the code "CWNHA". As per the 19 July 2018 announcement, the group has elected to redeem all of the outstanding CWHNA Notes on the first call on 14 September as per the terms of the CWHNA Notes. This is expected to reduce the group’s debt by approximately $400 Mn. As at June 30, 2018, the group had a total outstanding debt of $1,492.7 Mn from the prior year where it was at $1,945.0 Mn, representing s significant reduction of 23.3% on Y-o-Y basis.

 

Debt Maturity Profile (Source: Company Reports)

From the analysis standpoint, CWN has a return on equity or ROE of 10.9% as at FY 2018 which implies the fall from 37.0% in 2017. The company has a current ratio of 2.46x in FY 2018 which is above the industry average of 1.14x. Moreover, Crown Resorts Limited has a net margin of 16.4% in FY 2018 as compared to 54.6% in 2017. However, the financials are yet to be on a positive side, the share price has fallen 2.44% in the past three months as at October 18, 2018 and traded close to the higher level. The company has P/E of 16.25x and beta of 1.42x as on 5-Year (monthly basis), signifying mixed scenario at the current juncture. Hence, we maintain our “Hold recommendation on the stock at the current market price of $13.10, considering aforesaid facts and current trading level.

SeaLink Travel Group Limited

Healthy Five-Year Performance: SeaLink Travel Group Limited (ASX: SLK) has a sound track record of delivering decent financial performance and growth over the years. The Company has achieved a five-year compound annual growth (CAGR) in revenue and EBIT of 19.2% and 28.3% respectively to FY17 while underlying NPAT recorded CAGR growth of 29.3 percent over the same period. Moreover, SLK posted a decent growth of 4.0% in total revenue for FY18 as compared to prior year. However, underlying NPAT was down by 6.4% to $22.1 million against $23.6 million in FY17. It was mainly impacted by an after-tax effect of one-off acquisition-related expenses of $2.0 Mn and one-off start-up costs associated with the two new ferry services of $0.3 Mn during the period. On the balance sheet front, the company had cash and cash equivalent of $3.2 Mn as at June 30, 2018. The current ratio increased from 0.68x to 0.96x in FY18 over the prior year while the Debt-to-Equity Ratio stood at 0.71x in FY18.

On the other hand, the South Australian Government has reached a decision in response to the request i.e., extension of SeaLink’s existing arrangements for the use of port facilities at Cape Jervis and Penneshaw and decided the use of port infrastructure and facilities will involve a competitive tender to take effect from 1 July 2024 as part of these arrangements. As of now, the ongoing contractual arrangement will be expiring on July 2024.


Five Year Financial Performance (Source: Company reports)

Meanwhile, the stock has generated a YTD return of 1.73% and traded at a level close to 52-week higher level. In the last six months, the stock has risen by 3.52% but was down by 1.699% on October 19, 2018. Based on the foregoing and trading level, we maintain our “Hold” recommendation on the stock, which trades at the current price of $ 4.050.

Tabcorp Holdings Limited

Brighter Outlook Ahead:Tabcorp Holdings Limited (ASX: TAH) is a world-class, diversified gambling entertainment company with the market capitalization of circa $9.74 Bn as of October 19, 2018. The primary objective of the group is to support a racing industry which would be the pride of the nation. Recently, the company disclosed the result of Annual General Meeting (AGM) wherein the shareholders of the company have approved several resolutions such as election of Mr. Harry Boon and Mr. Steven Gregg as a Director of the company, adoption of remuneration report, grant of performance rights to Managing Director and Chief Executive Officer, and acceptance of non-executive Director fee pool. Moreover, the company has welcomed recent developments which create a better regulated and more sustainable gambling industry. These developments are legislation to ban synthetic lotteries and Keno products effective from January 2019, illegal online betting on live sport, and restrictions on gambling advertising during sports effective from March 2018, etc. On the other hand, the company holds a well-diversified portfolio including trusted consumer brands like Golden Casket, Tatts, NSW Lotteries, TAB, Sky Racing, and Keno. In addition to this, the group also has B2B brands, including MAX and TGS. In our view, the company has a brighter outlook ahead backed by strong fundamentals, robust portfolio performance, and recent regulatory reforms toward gambling industry.


Well-Diversified Portfolio Including Trusted Consumer Brands (Source: Company Reports)

Meanwhile, the share price declined by 11.03 percent in the past six months as of October 19, 2018 and traded at higher PE level of 254.21x. As of now, the stock traded at a significant discount to a 12-month high of $5.735 against lower premium to a 12-month low of $4.16. On analysis front, the company has turnaround positive return on equity (RoE) of 0.7% in FY18 from negative RoE of 1.3% in last year. The debt-to-equity ratio is substantially down from 1.12x to 0.48x in FY18 as compared to the prior year. By looking at its improving financials and positive outlook ahead on the back of aforesaid facts, we maintain our “Buy” recommendation on the stock at the current price of $ 4.810.

 

 
Stock Price Comparative Chart (Source: Thomson Reuters)
 

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