Stocks’ Details
 

Whitehaven Coal Limited

Decent Financial Performance in 1HFY19: Australia’s leading high quality coal company, Whitehaven Coal Limited (ASX: WHC) welcomed the announcements by the Queensland Minister for State Development, Manufacturing, Infrastructure and Planning, The Honourable Cameron Dick and the Queensland Coordinator-General, Mr. Barry Broe has declared the Whitehaven Coal's $1 billion Winchester South project as a ‘Coordinated Project’ under the State Development and Public Works Organisation Act 1971. Upon the commissioning, the project is anticipated to produce high quality metallurgical coal for export to the Asian market. At full capacity, the mine is targeting run-of-mine production of approximately 15 MTPA (million tonnes per annum) of mainly high-quality metallurgical coal, providing a boost to local communities and returning millions in royalties to the Queensland economy each year. The Coordinated Projects have strategic significance to an area of the State because of the potentially significant economic and employment benefits they bring.


Results – 1HFY19 (Source: Company Reports)
 
The revenue for the company stood at $1,270.1 million in 1HFY19, up by 11% on the prior corresponding period (pcp), primarily on the back of substantial increase in realised prices in AUD.The company reported a record net profit after tax of $305.8 million for the first half of FY2019, an increase of 19.0% on pcp. The net margin and ROE stood at 24.1% and 8.8% in 1HFY19 an increase by 180 bps and 110 bps on pcp.
 
Looking Ahead: FY2019 guidance for saleable coal production is updated to be in the range of 21.5Mt to 22.5Mt. Cost guidance for the full year has increased to $67/t (excluding royalties) from previous guidance of $64/t. Lower production in the September quarter, associated underutilised logistics and demurrage impacts, as well as higher diesel prices, were the key reasons for the cost guidance increase.
 
Meanwhile, the share price has fallen 6.65% in the past three months as at 18 April 2019 and is trading below the average of 52 week high and low prices of $4.728, proffering a decent opportunity for accumulation. Based on the foregoing, we maintain our “Buy” recommendation on the stock at the current market price of $4.460 per share (up 6.444% on 18 April 2019).
 

Afterpay Touch Group Limited

Significant Increase in Underlying Sales: Afterpay Touch Group Limited (ASX: APT) provided a recent update in relation to the Afterpay US Inc. 2018 Equity Incentive Plan as its business in the US is growing and Afterpay US Inc. is approaching the maximum level of options issuance under the Plan.APT shareholders approved the Plan at the 2018 Annual General Meeting.

Under the Plan, Afterpay US Inc. may offer options which give eligible participants a right to acquire common stock (or shares) in Afterpay US Inc. On vesting and exercise of the US Options, common stock in Afterpay US Inc. will be allocated.


Group Financial Snapshot- H1FY19 (Source: Company Reports)
 
The company reported an underlying sale of $2.3 billion in H1 FY19, an increase of $1.4 billion or 147% as compared to the prior corresponding period. The total income, however, stood at $116.1 million (pro forma), an increase of 91.0% as compared to H1 FY18.

All the key margins remained under pressure for the period of H1FY19 along with the profitability ratios declining over the prior corresponding period (ROE by 790 bps and ROIC by 480 bps, to -8.4% and -5.1%, respectively in 1HFY19).
 
Strong Margin Focus in Mid-Term: The company is maintaining a strong mid-term (FY22) margin focus, with its near-term focus on accelerating the US and international growth, investing in the key brand relationships, platform innovation and broadening global support and infrastructure.

Meanwhile, the share price has risen 41.68% in the past three months as at 18 April 2019 and is trading close to 52-week higher level. Moreover, the P/BV of the stock stands at 16.1x which is much higher than the peer medians of 2.3x, indicating a probable overvaluation at the current levels. Its EV/Sales ratio stands at 28.01x which is higher than the industry median of 2.0x, showing overvalued position at the current juncture. Hence, we maintain our “Expensive” rating on the stock at the current market price of $22.810 per share (down 2.271% on 18 April 2019).
 

Syrah Resources Limited

Assessing strategic relationship options: Syrah Resources Limited (ASX: SYR) has obtained a waiver from ASX Listing Rule 14.7 in relation to the Company’s upcoming Annual General Meeting. The waiver allows Syrah not to disregard votes on Resolution 6: Ratification of Prior Issue of Shares, which are cast by Nominee Holders on behalf of beneficiaries who did not participate in the placement to institutional and sophisticated investors in September 2018.
 

Consolidated Statement Of Comprehensive Income – FY18 (Source: Company Reports)
 
The loss for the company after income tax for the financial year ended 31 December 2018 stood at $29.0 million as compared to $12.3 million in FY17.
 
Outlook: The company expects cash operating costs (FOB Port of Nacala) trending downwards towards $400 per tonne over 2019 for Balama Graphite Operation. With respect to sales and logistics, the company stated that continued higher selling prices is expected from a price premium reflecting cost differential and value in use. It will continue to assess strategic relationship options in downstream production in the Battery Anode Material project.
 
In the past one month, the stock posted 16.51% return, and in three months, it posted -37.31% return reflecting that the stock is quite volatile. By looking at its decent outlook and current trading level, we, therefore, uphold our “Speculative Buy” recommendation on the stock at the current market price of A$1.235 per share (up 1.646% on April 18, 2019).
 

Telstra Corporation Limited

Significant Cost Reduction: Telstra Corporation Limited(ASX: TLS)provided a subdued performance for the six-month period ended 31 December 2018 wherein EBITDA stood at $4.3 billion in 1HFY19, down by 16.4 per cent, and NPAT stood at $1.2 billion, down 27.4 per cent which was mainly driven by NBN impacts.The company reduced costs and it is in line to meet FY19 targets as part of the goal of achieving $2.5 billion net productivity improvement by 2022.
 

Results Half-Year ended 31-December 2018 (Source: Company Reports)
 
EBITDA guidance: In FY19, the company expects a total income of $26.2 billion - $28.1 billion along with an EBITDA (excluding restructuring costs) of $8.7 billion to $9.4 billion. The company expects the capital expenditure to be within a range of $3.9 billion and $4.4 billion while itexpects the free cash-flow to be within $3.1 billion and $3.6 billion.
 
Driven by continued growth in the customer numbers along with significant progress on the 5G spectrum front and the progress in executing T22 strategy, the outlook of the company remains decent.
We expect the stock to rally in the short-medium term continuing its momentum on the back of the 5G network implementation around the corner in Australia. Hence, considering its decent business outlook amidst certain challenges, we maintain our “Hold” recommendation on the stock at the current market price of $3.410 per share (up 1.488% on 18 April 2019).
 

The A2 Milk Company Limited

Strong Revenue Growth in 1HFY19: The A2 Milk Company Limited (ASX: A2M) posted a decent set of 1HFY19 results wherein the company recordedstrong revenue growth of 41.0% to $613.1 million in H1 FY19 against the prior corresponding period. It was mainly driven by the product mix growth across all the key regions during the same period. NPAT stood at $152.7 Mn in 1HFY19, exhibiting robust growth of 55% on PCP basis.


Results Highlights- 1H19 (Source: Company Reports)
 
From the analysis standpoints, ROE and pre-tax ROA declined by 570 bps and 300 bps to 25.5% and 29.0% respectively in 1HFY19 over the prior corresponding period.

Guidance for FY2019-2020: As per the company guidance, second half EBITDA margins will consequently be lower than the first half, with full year FY19 EBITDA as a percentage of sales expected to be approximately 31-32%. Moreover, it expects that the Group revenue growth rate in the second half to continue broadly in line with the first half. The increased brand and marketing investment is expected to continue into FY20.
 
The stock’s return remained volatile over the short-term with 52.60% and 9.98% returns over the past six months and one-month period, respectively. Currently, the stock is trading slightly towards its 52-week high range of $15.130. Given the mix scenario, we have a wait and watch view on the stock at the current market price of A$14.650 per share (down 1.875% on 18 April 2019).
 
 
Comparative Price Chart (Source: Thomson Reuters) 

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