Qantas Airways Limited

QAN Details

Financial Performance Portends Decent Growth in Future: Qantas Airways Limited (ASX: QAN) operates in the aerospace industry and is one of the largest airlines in Australia. The company recently bought back 47,900,737 shares for a consideration of $265,046,440.52 million via on-market trade.
 
Key Financial Highlights: During 1H19,Qantas recorded an underlying profit before tax (PBT) of $780 million, down $179 million from 1H FY18. Statutory PBT of $735 million in 1H FY19 was also down by $105 million from 1HFY18. Net free cash flow for the period came in at $218 million. Profit from the domestic business was $659 million, up 1% on a year-on-year basis. International revenue increased by 7% to $3.7 billion but EBIT declined by 60% to $90 million due to the increase in fuel costs.


Income Statement for 1HFY19 (Source: Company Reports)
 
Outlook: During 2H19, the Group expects to generate strong net free cash flow. Growth in group capacity is expected to be constant across domestic and international. FY19 fuel cost expected to be around $3.90 bn, an increase of 21% against FY18. Fuel for FY20 is fully hedged with 73% participation in favourable price movements. The management expects Transformation benefits in FY19 to be around $400 million. FY19 Capex (net of asset sales) is anticipated to be $1.6 billion with $1 billion spent in the first half.
 
Stock Recommendation: The stock generated a negative return of 3.65% on YTD basis. Considering the decent financial position, optimistic outlook for future growth, and its position in the related industry, we give a “Buy” recommendation on the stock at the current market price of $5.550 per share (up 1.093% on 31 May 2019).


QAN Daily Chart (Source: Thomson Reuters)
 
 

Webjet Limited

WEB Details

WebBeds B2B Business- a key catalyst: Webjet Limited (ASX: WEB) has an engagement in the digital travel business which provides online booking services. The company recently, confirmed thatUBS Group AG and its related bodies corporate ceased to be a substantial shareholder of the company since 10 May 2019.
 
Financial Highlights: During 1H19, the company reported revenue of $175.3 million, up 33% on yoy basis. EBITDA of $58 million also posted robust growth of 42% for the same period.  Furthermore, WebBeds B2B business recorded EBITDA more than double in 1HFY19 on a Y-o-Y basis, from $12.8 Mn in 1HFY18 to $30.1 Mn in 1HFY19. This was a result of strong growth witnessed in key European and Middle East markets, with considerable growth from the Americas as well. Other businesses including Webjet OTA and Online Republic also reported a fair growth.
 

EBITDA contribution by business units (Source: Company Reports)
 
In 1H FY19, Webjet’s TTV increased to $1.9 billion, up 29% on pcp and net profit after tax was $38.3 million, up 61% on yoy basis. The earnings per share was increased by 48% to 31.5 cents from the continued operations. Cash and cash equivalents remained stable at $182.7 million. An improved working capital position was also reflected in the balance sheet.
 
Outlook: Looking at the performance in the first half of 2019 which demonstrated a decent global growth, Webjet reconfirms FY19 guidance and is set to record an EBITDA of at least $120 million that will exclude on-offs associated with the acquisition of DOTW.
 
Stock Recommendation: The stock has risen 20.30% in the last one year. Looking at the financial position in terms of EBITDA and EPS along with growth prospects in future, we give a “Buy” recommendation onthe stock at the current market price of $14.850 per share (down 0.067% as on 31 May 2019).


 WEB Daily Chart (Source: Thomson Reuters)
 
 
Resolute Mining Limited

RSG Details

Low Cost Mines to Augment Growth:Resolute Mining Limited (ASX: RSG) operates in the Metals and Mining sector. It is involved in the exploration and development of Gold properties, primarily in Africa, and Australia. During FY18, Revenue of $223 million generated a gross profit from operations of $24 million. RSG reported a net loss after tax of $5 million which was inclusive of an adverse movement in the valuation of net realisable inventory of $29 million offset by $15.5 million of unrealised foreign exchange gain on intercompany loans. Net investing cash flow for the period was A$181 million. The key management believes in the Resolute’s strategic progress and considers the company to be in a good financial position to complete investment to deliver low-cost mines at Syama, Ravenswood and Bibiani.

Statement of Comprehensive Income – 1H19 (Source: Company Reports)
 
Outlook: The management continued the investments during 1H19 for future growth. The company will keep on generating a robust operating cash flow and is expected to remain a profitable dividend paying gold miner. Moreover, the company is very affirmative about Resolute’s value as they ramp-up the Syama Underground to full production, increase presence in global capital markets through listing on London Stock Exchange, and deliver on the growth agenda. 
 
Stock Recommendation: Meanwhile, the share price of the company has risen 14.29% in the past six months as at 31 May 2019, exhibiting a decent return over the said period, which might attract the attention of the market players. Hence, considering the business prospects and on-going developments, we give a “Buy” recommendation to the stock at the current market price of $1.120 per share (up, 0.901% as on 31 May 2019).


RSG Daily Chart (Source: Thomson Reuters)
 

National Australia Bank Limited

NAB Details

Decent Outlook: National Australia Bank Limited (ASX: NAB) is engaged in providing banking services, credit and access card facilities, leasing, housing and general finance, international banking, investment banking, and wealth management services, etc. The company recently announced that it has become a substantial shareholder of the Star Entertainment Group Limited by acquiring a total of 46,573,645 shares with a 5.077% voting power.
 
During 1HFY19 (ending March 2019), the company reported cash earnings of $2,954 million, up 7.1% as compared to the previous corresponding period. Net operating income rose by 1.4% to $9,218 million and the underlying profit was $5,163 million, up 1.2% on pcp.Cash ROE during the period was 11.7% as compared to the previous cash ROE of 11.4%. Operating expenses for the company increased by 1.7% to $4,055 million in the same period.
 

Key Financial Metrics (Source: Company Reports)
 
Outlook: Due to the modest GDP growth, the company foresees a challenging operating environment. Other factors include low growth in housing credit, house price decline, significant regulatory changes, higher customer and community expectations, intense home loan expectation, etc. These challenges will pose a difficult environment for NAB and industry as a whole. The company plans to reorient its culture to adapt to the above conditions. Despite that, productivity benefits and greater flexibility through capital settings to accommodate potential earnings volatility will help in increasing profitability over the period.
 
Stock Recommendation: The stock is currently trading at $26.490 with a price to earnings multiple of 12.920x. Considering the diligent strategies to cope with future challenges, the company is likely to grow at a decent pace in the future. Hence, we recommend a “Buy” rating on the stock at the current market price of $26.490 per share (down 0.038% as on 31 May 2019).

NAB Daily Chart (Source: Thomson Reuters)
 

 James Hardie Industries Plc

JHX Details

Transforming to drive profitable growth:James Hardie Industries Plc (ASX: JHX) is a world leader in the manufacturing of fiber cement building materials. As at 31 March 2019, the annual net sales from North America Fibre Cement amounted to $1,677 million, up 6% on pcp. Asia Pacific Fiber Cement reported revenue of $447 million, up 5% on pcp. Europe building products reported revenue of $368 million, up 915% on pcp. EBIT from these geographies amounted to $388 million (up 2%), $100 million (down 8%) and $10 million (up 9.7%), respectively. The Net operating profit after tax was reported at $301 million, up 3% on the prior corresponding period.
 

Key Financial Highlights (Source: Company Reports)
 
Outlook: The company expects to see considerable growth in the US housing segment in 2020. New construction is expected to start within a range of 1.2 million and 1.3 million. The EBIT margin of the North American Fibre Segment is expected at a range of 20% to 25% for the fiscal year 2020 as the company will continue to improve operating performance in the plants. This will also be backed by higher net average sales price and mix, inflation for input costs and fair housing growth. Europe Building Products segment is expected to see annual net sales and EBIT margin growth, going forward.
 
Stock Recommendation: The company is trading at a price to earnings multiple of 25.0x with a market capitalisation of ~$8.15 billion. Hence considering a decent outlook in the business and current trading level, we give a “Buy” recommendation on the stock at the current market price of $18.340 per share (up 0.493% as on31 May 2019).


JHX Daily Chart (Source: Thomson Reuters)
 

Boral Limited

BLD Details

Boral Australia to Continue the Growth:Boral Limited (ASX: BLD) is engaged in the manufacturing and supply of building and construction materials in Australia, the USA and Asia. The company recently updated that BlackRock Group has increased its voting rights from 6.01% to 7.02%. The company in FY18 witnessed a strong financial performance with a growth of 34% in top-line and 38% growth in bottom-line. In 1H FY19, the company witnessed a strong earnings growth from Boral North America whereas Boral Australia and USG Boral saw a softer result. All the segments of the business posted an improvement in RIFR as compared to FY18. RIFR (Recordable Injury Frequency Rate) for the company came in at 6.7 in 1H FY19, down from 8.3 in 1H FY18 and 8.7 in FY18. With net debt of $2.30 billion, interest coverage ratio stood at 6.1x.


Group Financial Performance in 1H FY19 (Source: Company Reports)
 
Outlook: For Boral Australia, FY19 EBITDA is expected to be broadly in-line with the prior year (excluding property).  The management is of the view that the second half of FY19 is progressing in-line with the expectations with property on track to deliver around $30 million in FY2019. For Boral North America, the management expects EBITDA growth of ~15% (in US dollars) for FY19. However, USG Boral is likely to post a lower profit in FY19 as compared to FY18.

Stock Recommendation: At the current market price of $5.430 per share, the stock is trading at price to earnings multiple of 12.62x. Annual dividend yield for the stock stands at 4.97%. Overall operational excellence, diversified revenue (in-terms of geography), and strong performance of Boral Australia, etc., augur well for the long-term growth. Hence, we recommend a “Buy” rating on the stock at the current market price of $5.430 per share (up 4.423% on 31 May 2019). 


BLD Daily Chart (Source: Thomson Reuters)

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