5 Big Stocks with Recurring Return on Equity – CSL, Ramsay, Lendlease, Scentre and Brambles

CSL Limited

CSL Details

Exploring new opportunities: CSL Limited (ASX: CSL) delivered an overall operating revenue rise of 15% on a year on year (yoy) basis to US$6.92 billion for FY17, while reported net profit after tax reached US$1.33 billion. Return on invested capital was 24.5%, which is better than the average return on invested capital for Australia’s top 15 Companies (excluding CSL) of over 7% for the year ended 30 June 2016. For FY18, the group reiterated that their NPAT would be in the range of over ~$1,480 million – $1,550 million. 

FY17 performance for products (Source: Company reports)

The group is investing in new plasma opportunities and the planning for CSL 112 (apoA-I) Phase III is ongoing. The group is expanding into the high growth China market while investing in new biotech opportunities including Calimmune and Momenta. On the other hand, CSL stock delivered over 38.5% in this year to date and now trades at higher levels (as of October 23, 2017). We give an “Expensive” recommendation on the stock at the current price of $ 139.91


CSL Daily Chart (Source: Thomson Reuters) 

Ramsay Health Care Limited

RHC Details

Developing Pharmacy Franchise Network: Ramsay Health Care Limited (ASX: RHC) delivered a Core Net Profit after Tax (NPAT) rise of 12.7% yoy to $542.7 million for the year ended 30 June 2017. The group is developing the Ramsay Pharmacy Franchise Network to offer community-based health services around their hospitals. The group is canvassing emerging opportunities in UK, Asia and other markets. RHC recently appointed former Chief Operating Officer, Craig McNally, as the Company’s new Managing Director and Chief Executive Officer. RHC stock recovered over 6.2% in the last four weeks (as of October 23, 2017) and we believe the bullish momentum would continue given the potential and the high-quality portfolio of strategically located assets in Australia and across the globe.We give a “Buy” recommendation on the stock at the current price of $ 66.40


RHC Daily Chart (Source: Thomson Reuters)

Lendlease Group

LLC Details

Mixed FY18 outlook: Lendlease Group’s (ASX: LLC) stock crashed over 11% in the last five days (as at October 23, 2017) as the group forecasted that their FY18 result might be impacted by underperformance in their Australian construction business related to a small number of engineering projects. Their first half of 2018 EBITDA contribution from the Australian construction business would be lower than the prior corresponding period. However, outperformance in other segments is said to play a role in mitigating the impact from weakness in construction business. Meanwhile, the group sold 25% of their Retirement Living business to APG Asset Management N.V. while the group retained the remaining 75%. On the other hand, the group’s Australian development business continues to perform well while their international diversification is ongoing with the delivery of projects in London, Singapore, Kuala Lumpur and the United States. LLC won further projects in London and Milan which are moving forward to contractual close. The group also established a joint venture with Softbank Group to develop and own telecom infrastructure assets in the United States. The group and Softbank have each committed US$200 million equity to fund identified seed assets of approximately 8,000 rooftops and other telecom sites. This joint venture is targeting US$5 billion of telecom infrastructure assets over the medium term. LLC has over 4% dividend yield while we give a “Hold” recommendation on the stock at the current price of $ 16.38


LLC Daily Chart (Source: Thomson Reuters) 

Scentre Group

SCG Details

Decent Outlook: Scentre Group (ASX: SCG) is having a strategic focus for long-term sustainable growth based on its product mix, development activities and redevelopment efforts.


FY17 Forecast (Source: Company Reports)
 
SCG’s Funds from Operations of $638 million for the six months to 30 June 2017 represented 12.01 cents per security, which is a rise of 3.5%. The group had reported a distribution of 10.86 cents per security, which is an increase of 2%. SCG now aims to deliver full year growth in Funds from Operations of over 4.25% with distribution growth of 2% to 21.73 cents per security based on the on-going performance. The stock is trading at a very reasonable P/E and has a good dividend yield. We give a “Buy” recommendation on the stock at the current price of $ 4.04


SCG Daily Chart (Source: Thomson Reuters) 

Brambles Limited

BXB Details

Slip in Return on Capital invested: Brambles Limited (ASX: BXB) had delivered a sales revenue growth from continuing operations of 8% at actual FX rates on a yoy basis to US$1,374.0 million for the first three months of the financial year ending 30 June 2018 (FY18). Sales revenue in the US pallets business enhanced 4% boosted by solid net new business growth related to new customer contract wins in the last quarter of FY17 and the first quarter of FY18.


First three months of FY18 performance (Source: Company reports)
On the other hand, revenues in CHEP Asia-Pacific were weak in FY17 impacted by wind down of a large RPC contract and several automotive contracts in Australia. The group continues to operate in a tough operating and competitive environment, and is facing cost pressures across the portfolio, especially in the US pallets business. These challenges have impacted the group’s Return on Capital invested metric that slipped by 2.3% percentage points. We give an “Expensive” recommendation on the stock at the current price of $ 9.27


BXB Daily 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.