Downer EDI Limited

DOW Details

Positive outcome from Spotless review: Downer EDI Limited (ASX: DOW) stock rose 5.1% on November 27, 2017 after the company announced that they have completed the review of the Spotless Group Holdings Limited’s business planning, budgeting and target setting process, which is largely positive. Both of them are working together on a range of important areas including Zero Harm, Customers and Markets, Bid Management, Major Contract Reviews, Procurement, IT and Finance. Moreover, after a review, DOW is expecting FY18 consolidated underlying net profit after tax and before amortisation of acquired intangible assets (NPATA) of $295 million before minority interests. In this included is the NPATA of $202 million for Downer and $93 million for Spotless. DOW has upgraded the stand-alone guidance for 2018 by $5 million to NPATA of $202 million, or net profit after tax of $195 million.

 

Consolidated Income Statement (Source: Company Reports)
 
Additionally, DOW is planning a refinance of Spotless’ debt and performance bonding facilities for calendar 2018. In addition, DOW is targeting a dividend payout ratio of around 50% to 60% of consolidated underlying NPATA, adjusted for ROADS dividends paid. Meanwhile, DOW stock is trading at a high level and we believe that it is “Expensive” at the current price of $7.07



DOW Daily Chart (Source: Thomson Reuters)
 

WorleyParsons Limited

WOR Details

Completed the acquisition of AFW UK Oil & Gas Limited and the entitlement offer: WorleyParsons Limited (ASX: WOR) saw a stock price surge of 3.8% on November 27, 2017, with Dar AI-Handasah Consultants Shair and Partners Holdings Ltd increasing their shareholding from 15.15% to 19.9%. Project Management Consultancy services contract has been lately awarded to WOR by Reliance Industries in the Krishna Godavari Basin in India. WOR has also has completed the acquisition of AFW UK Oil & Gas Limited (AFW UK) for an enterprise value of A$303 million. For this, the company has successfully raised $322 million through the entitlement offer. The Acquisition and the Entitlement Offer is expected to be EPS accretive in the first year of ownership and reduces the net debt / EBITDA from 2.4x to 2.2x. Moreover, the acquisition is a robust entry for WOR into the UK North Sea market as a profitable market leader and is an acceleration of WOR strategy to build a global MMO business. As a result, WOR stock has risen 14.57% in three months as on November 24, 2017, and we give a “Hold” recommendation on the stock at the current price of $15.46



WOR Daily Chart (Source: Thomson Reuters)
 

Transurban Group

TCL Details

Positive September Quarter Performance: Transurban Group (ASX: TCL) in the September quarter had posted 1.1% increase in the Average Daily Traffic (ADT) due to the positive growth in Sydney, Brisbane and the Greater Washington Area offset by disruption in Melbourne from the $1.3 billion CityLink Tulla Widening (CTW) upgrade as works increased to provide an early opening. Moreover, in the September quarter, the toll revenue grew by 10.5% to $567 million when compared to the prior corresponding period (pcp). Proportional toll revenue, grew by 11.4% over pcp, to $589 million. All the company’s projects are going as per the budget and on time.

 

Traffic and revenue performance in the September quarter (source: Company Reports)
 
Meanwhile, TCL stock has risen 5.22% in three months as on November 24, 2017. For FY18, TCL has issued distribution guidance of 56 cents per security, which would be an 8.7% increase on last financial year’s distribution. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $12.73



TCL Daily Chart (Source: Thomson Reuters)
 

Boral Limited

BLD Details

Transformational growth in the USA: Boral Limited (ASX: BLD) expects an increase in energy costs at the upper end of $15-$20 million estimated range for Boral Australia in FY18, while the Property earnings in FY18 are currently expected at lower end of historical range ($8m–$46m), skewed to the second half. BLD expects to have a high single-digit EBIT growth in FY18. For USG Boral, the profit is expected to grow at a high single-digit growth rate, and Sheetrock is expected to deliver price, volume and cost benefits across all markets with second half improvements expected from Indonesia and Thailand businesses. On the other hand, softer activity is expected in Australian and Korean residential construction markets. In FY18, for Boral North America, there is an expectation of significant growth in EBIT from the full year contribution of Headwaters along with US$30–35m of year 1 synergies. Meridian Brick JV is expected to contribute an earnings uplift from market growth and synergies. There is an assumption for delivery of market growth projection of approximately 8% in housing starts (to approximately 1.29 million), approximately 5% increase in US infrastructure activity, approximately 12% growth in Non-residential and approximately 6% growth in Repair & Remodel.

 

Earnings and Dividends (Source: Company Reports)
 
Overall, BLD is maintaining and strengthening the leading position in Australia at the back of strong east coast conditions and the quarry reinvestment that leverages the ability to deliver major projects. Further, BLD is witnessing transformational growth in the USA with the Headwaters acquisition and Meridian Brick JV. We give a “Buy” recommendation on the stock at the current price of $7.53



BLD Daily Chart (Source: Thomson Reuters)
 

Spark Infrastructure Group

SKI Details

TransGrid final regulatory determination is expected to be received in April 2018: Spark Infrastructure Group’s (ASX: SKI) distribution businesses provide cash flow certainty to June 2020 (SA Power Networks) and December 2020 (Victoria Power Networks). SKI’s businesses also have strong investment grade capital structures (Victoria Power Networks A-, SA Power Networks A-/A3 and TransGrid Baa2). Moreover, TransGrid had received its draft regulatory determination in September 2017, and the final regulatory determination is expected in April 2018 and will be effective from July 2018, which will provide 5 years of cash flow certainty. Meanwhile, SKI had confirmed the FY18 distribution guidance of 16.0 cents per share, which is an increase of 4.9% on FY17. Given the potential, we put a “Buy” recommendation on the stock at the current price of $2.62



SKI 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.