Scentre Group

SCG Details

Retirement of Chief Operating Officer: Scentre Group (ASX: SCG) is into development and management of property and has a market capitalisation of A$20.46 Bn as on 21^st October 2019. The company recently announced that it has bought back 36,192,396 shares at the consideration of $141,251,814.05 by issuing its daily share buy-back notice. In another update, the company announced that Chief Operating Officer, Greg Miles will be retiring in 2020 after almost 23 years with Scentre Group and Westfield executive teams. The following picture provides an idea of key metrics of the company for the half-year ended 30^th June 2019:


Key Metrics (Source: Company Reports)

For the half-year ended 30^th June 2019, the company declared distribution of 11.30 cents, reflecting a rise of 2.0%, which was in accordance with the forecast.At the current market price of A$3.840 per share, the annual dividend yield of the company stood at 5.81% in comparison to the industry median (Financials) of 4.5% on a TTM basis.

What to Expect:SCG anticipates FFO growth per security of around 0.7%, which includes the impact of the transactions announced in the 1H (3.0% excluding those transactions). It added that this does not consider the anticipated positive earnings impact of up to $800 Mn security buy-back program. Scentre Group reconfirms the distribution forecast for 2019 of 22.60 cps which implies an increase of 2%.

Stock Recommendation:On the valuation front, the stock of SCG is trading at a price to cash flow multiple of 15.6x as compared to the industry median (Residential & Commercial REITs) of 19.9x on TTM (Trailing Twelve Months) basis.The stock is available at an EV to EBITDA multiple of 17.5x against the industry median (Residential & Commercial REITs) of 20.6x on TTM basis. The stock has corrected 1.79% in last one year and is currently trading slightly below the average of its 52-week trading range of $3.630 - $4.160. Thus, considering the valuation parameters, decent outlook and current trading levels, we give a “Buy” recommendation on the stock at the current market price of A$3.840 per share, down 0.26% on 21^st October 2019.

 
SCG Daily Technical Chart (Source: Thomson Reuters)
 

Tabcorp Holdings Limited

TAH Details

Appointment of Non-Executive Director:Tabcorp Holdings Limited (ASX: TAH) is in the provisioning of gambling and other entertainment services. The market capitalisation of the company stood at A$9.8 Bn as on 21^st October 2019. Recently, the company, through a release dated 11^th October 2019 that it has appointed Mr David Gallop AM to its Board as a Non-Executive Director, subject to the receipt of regulatory and ministerial approvals. It added that Mr David Gallop AM is one of Australia’s longest serving and most respected sports administrators. In another update, the company announced that it would be holding in 2019 Annual General Meeting on 24^th October 2019.

In FY19, TAH declared a final dividend amounting to 11.0 cps, fully franked, which brought the full-year dividend to 22.0 cps. This reflected a payout ratio of 100% of NPAT before significant items, amortisation of the Victorian wagering and betting licence and PPA, in accordance with stated policy. At the current market price of $4.870 per share, the annual dividend yield of the company stood at 4.55% against the industry median (Consumer Cyclicals) of 4.2% on a TTM basis. The following picture depicts an idea of FY19 results:


FY19 Results (Source: Company Reports)

Future Aspects:The company stated that the first full year of the Tabcorp-Tatts combination has delivered decent revenue and earnings growth. It added that the integration is on track, with most activities to be wrapped up by the end of FY20. The company is focused on generating attractive and sustainable shareholder returns over the long-term, along with delivering benefits for its partners, customers and the community.

Stock Recommendation:At the current market price of $4.870, the stock is trading toward the higher band of its 52-week trading range of $4.090 - $4.980. The stock has gained 14.15% on YTD basis. The net margin of the company stood at 6.8% in FY19, reflecting a YoY growth of 2.8%. This implies that the company has improved its capabilities to convert its top-line into the bottom-line. On valuation front, the stock of TAH is trading at EV to Sales multiple of 2.4x as compared to the industry average (Hotels & Entertainment Services) of 3.5x on TTM basis. On the stock performance front, it produced returns of 5.22% and 1.26% in the time period of three months and six months, respectively. Thus, considering the above-stated facts, FY19 results with the combination of Tatts, current trading levels, etc., we maintain a “Hold” rating on the stock at the current market price of A$4.870 per share, up 0.62% on 21^st October 2019.

 
 TAH Daily Technical Chart (Source: Thomson Reuters)

 

Spark Infrastructure Group

SKI Details

A Look at Distribution Guidance: Spark Infrastructure Group (ASX: SKI) is a leading owner of a diversified portfolio of quality essential service infrastructure and has a market capitalisation of A$3.57 Bn as on 21^st October 2019. The company has recently published a presentation, wherein the company mentioned about its performance for the six months ended 30 June 2019 and its strategic priorities. SKI delivered growth of 12.8% in underlying standalone operating cash flow in 1HFY19.


Standalone Operating Cash Flow (Source: Company Reports)

As per the half-year results release, the company declared an interim distribution of 7.5 cps for 2019, in-line with the previous distribution guidance.The interim distribution was paid on 13 September 2019 and consisted of 3.5 cps interest on Loan Notes for the period and 4.0 cps capital distribution. The Board of Directors have also determined that the DRP would be reactivated for the interim 2019 distribution. The DRP would be used to partially fund the equity component of the acquisition and construction of the Bomen Solar Farm.

Future Guidance:The company remains focused on maintaining its sector-leading efficiency, delivering reliable and affordable electricity to consumers and on leading the transition to renewable and distributed energy. Subject to business conditions, the Board of directors have reconfirmed distribution guidance for FY 2019 of at least 15.0 cps.

Stock Recommendation:The company’s objective revolves around delivering long-term value via capital growth and distributions to securityholders from its portfolio of high-quality, long-life essential services infrastructure businesses. The net margin of the company stood at 36.1% in 1H FY19 as compared to the industry median of 20.7%. This implies that the company has better capabilities to convert its top-line into the bottom-line against the broader industry. As per ASX, the stock of SKI is trading close to its 52-week lower levels. Hence, considering the above-stated facts, we give a “Buy” recommendation on the stock at the current market price of A$2.050 per share, down 2.381% on 21^st October 2019.

 
SKI Daily Technical Chart (Source: Thomson Reuters)

 

WAM Capital Limited

WAM Details

Portfolio Update of WAM in September 2019:WAM Capital Limited (ASX: WAM) is one of Australia’s leading listed investment companies, managed by Wilson Asset Management, which provides investors with exposure to an actively managed diversified portfolio of undervalued growth companies. The company has a market capitalisation of $1.59 billion as on 21^st October 2019.

WAM Capital investment portfolio increased by 3.3% in September as compared to S&P/ASX All Ordinaries Accumulation Index, which increased by 2.1% in September. The portfolio outperformed the S&P/ASX All Ordinaries Accumulation Index by 1.2%.


Performance of Portfolio (Source: Company Reports)

Financial Highlights for FY19: WAM Capital reported an operating profit before tax of $6 million and an operating profit after tax of $14.5 million in FY19. The after-tax figure was up because of $8.5 million income tax benefit, delivered through franking credits received on franked dividend income from investee companies.

The operating profit for 2019 reflected the performance of investment portfolio over the period which was impacted by heightened volatility in Australian equity market. The Board declared a fully franked full year dividend amounting to 15.5 cents per share with the fully franked final dividend being 7.75 cents per share.

Stock Recommendation: At the current market price of A$2.180 per share, the stock has an annual dividend yield of 7.01%, which is high as compared to the average of investment banking and investment services industry of 4.4%. The stock is available at a price to book value of 1.2x, which is much lower as compared to the average of investment banking and investment services industry which is at 3.8x. The company’s stock is trading at a price to earnings multiple of 106.250x. Therefore, considering the above-stated facts, valuations and decent dividend-related parameters, etc., we maintain a “Buy” rating on the stock at the current market price of $2.180 per share, down by 1.357% on 21^st October 2019.

 
 WAM Daily Technical Chart (Source: Thomson Reuters)
 
 
 

Aventus Group

AVN Details

Dividend Announcement:Aventus Group (ASX: AVN) is a fully integrated developer, owner and manager of large format retail centres in Australia and has a market capitalisation of $1.51 billion as on 21^st October 2019. The company has declared a dividend of 4.22 cents per unitfor September quarter 2019. The ex-distribution date was 27^th September 2019, and record date was 30^th September 2019.The payment date and dispatch of statements date is on or about October 31, 2019.

Dividends Update: The company reported distribution per security of 16.6 cents for FY19. The company has given dividend guidance of 17.1 cents per share, and in the last four years, the distribution per security has reported a CAGR growth of 5.3%.


 
Distribution per share (Source: Company Reports)
 
Stock Recommendation: At the current market price of A$2.820 per share, the stock has an annual dividend yield of 6.05% which is higher as compared to the average of real estate operations sector of 4.4%. However, if we compare the price to earnings multiple and the EV/EBITDA multiple, the stock is trading at higher valuations. The stock has given a total return of 15.48% and 21.59% in the time period of three months and six months, respectively. Currently, the stock is trading close to its 52-week high and has gained 28.97% on YTD basis. Hence, in the view of aforesaid facts, and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $2.820 per share, up by 2.174% as on 21^st October 2019.

 
AVN Daily Technical Chart (Source: Thomson Reuters)

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