Primary Health Care Limited (ASX: PRY)

Providing consumers with an enhanced range of services: PRY delivers modern platforms with an enhanced digital presence, tools and marketing to its customers. The Group announced an underlying 1H18 NPAT of $44.0 million that is an increase of 5.0% as compared to last year and also a free cash flow of $45.7 million, that is an increase of 91.2% on pcp basis. Reported NPAT was $22.1 million, an increase of 4.7% on the comparative basis for the same period in the last year. Fully-franked dividends were up from 4.8 cents per share to 5.1 cents per share in the half which represented a pay-out ratio of 60% of Underlying NPAT. If we talk about the divisions, Pathology is the Group’s largest business providing over a third of all private pathology tests in the country. It delivered revenue of $534.0 million, that is up by 5.8% with an increase in both volumes and average fee per episode and also showed a strong performance in the niche specialities, particularly genetics which grew by 24.4%. It has developed shortened and simplified Healthcare Practitioners’ contracts with a far fewer legal restraints. It will open four new medical centres, an IVF clinic, day surgery and a high-end Imaging site. It has released its outlook for FY18 and the underlying NPAT is expected to be in the range of $92-$97 million. In Medical Centres, the program to transition away from upfront GP contracts is roughly half complete and is now being augmented by Project Leapfrog, an initiative that will shift its value proposition. Given the company’s trading levels, we maintain an “Expensive” recommendation on the stock at the current price of $3.65


Financial Performance Results (Source: Company Reports)
 

IOOF Holdings Limited (ASX: IFL)

Organic growth momentum continues: IOOF Holdings announced its first half year results for 2018.  Underlying Net Profit After Tax was up 19% to $94.8 million and the group declared an interim fully franked dividend of 27 cents per share (representing a 100% of pay-out ratio and will be paid in March, 2018). Funds under Management, Administration and Advice (FUMA) increased significantly and amounted to $120 billion and included net inflows of $1.6 billion which was up by 15% as compared to the first half of 2017. IOOF recorded a 20^th consecutive quarter of positive platform. Group’s net operating margin increased by 2 bps and edged to 23 bps. Expenses were reduced by $8.9 million as compared to 1H17. Cost-to-income ratio also improved substantially from 58.9% to 53.8%. It also entered into an agreement with ANZ to acquire ANZ’s OnePath pensions and investment business and aligned dealer groups. This transaction will be transformative for IOOF Robust organic growth and positive markets have provided ongoing momentum to each of its business. Despite share price declining by 3.76% in the past six months, IFL trades at a high level, and we give a “Hold” on the stock at the current price of $10.27


Margin Analysis (Source: Company Reports)
 

Medibank Private Limited (ASX: MPL)

Delivered an improved customer experience: Up 3.6% on February 16, 2018, Medibank announced its results for the six months ending 31 December 2017. The group paid $2.6 billion of claims on behalf of its customers for supporting them with their health and wellbeing. It will announce a Priority Program for its customers. Priority is the Company’s strategy to formally recognise and thank its customers who have been with them for 10 years or more. Thus, the group announced a $20 million one-off loyalty bonus to its customers in June. It is progressing well, and the management expenses were down by 1.9% in its health insurance business. Group’s NPAT increased by 5.9% and amounted to $245.6 million and whereas in 1H17 it was $231.9 million. Medibank Health Revenue rose by 4.5% and edged to $291.9 million and operating profits increased by 45.7% that reflected an improvement in its operating performance across all businesses that included the acquisition of Health Strong and increased contribution from its diversified insurance business. The Board declared an interim dividend of 5.50 cents per share, fully franked that represented a pay-out ratio of 64.4% of underlying NPAT. Net Investment income fell by 22.3% which was primarily due to lower equity and credit market returns. The share price has risen by 10.14% in the past six months and the stock still looks “Expensive” at the current price of $3.15


NPAT Analysis (Source: Company Reports)
 

Village Roadshow Limited (ASX: VRL)

Successfully reduced its Leverage Ratio: In the half-year ended 31 December 2017, VRL group disposed its 50.17 per cent of its shareholding in the dormant former parent entity, Entertainment Group Holdings Ltd, for no consideration. Following the restructuring, the VRL group’s shareholding in the iPic-Gold Class Entertainment (IGCE) business has been reduced to approximately 25 per cent. In addition, the previous 42.86 per cent shareholding in VRIF has been reduced to nil and VRL’s guarantee exposure in relation to the IGCE business has reduced from USD 24.2 million to USD 5.6 million in the second half of Financial Year 2017. Attributable Net Profit after tax before material items and discontinued profits was $0.04 million; and whereas in 1H17, it was $19.2 million. Further, EBITDA was $49.8 million as compared to $78.4 million in 1H17. VRL currently expects FY18 attributable NPAT to be in the range of $12-$17 million. The first half was impacted by two major factors outside the Company’s control. In Theme parks, the massive coverage was from Dreamworld tragedy which continued to shake confidence among people. On the other hand, a new pricing strategy has been implemented with strong attractions and powerful marketing campaign and its result has been very positive. VRL has been successful in bringing its leverage ratio down to below 3.00x as at 31 December 2017 which was followed by the sale of VRL’s 50 per cent share in Singapore Cinema Exhibition business and the sale and leaseback of freehold land at Oxenford, Queensland as proceeds from these transactions have been used to repay debt. The share price declined by 20.77% in the past six months but rose 5.5% on February 16, 2018 with the release of the result. We have a “Hold” recommendation at the current price of $3.15
 

Cash Flow Movement (Source: Company Reports)
 

The Star Entertainment Group Limited (ASX: SGR)

Mixed financial results for the first half of 2018: The Star and its consortium partners Chow Tai Fook Enterprises and Far East Consortium, together the “Destination Brisbane Consortium” or “DBC” have completed their review of the plan of development approval terms and all remaining conditions under the development agreements with the State of Queensland to proceed with the integrated resort construction works have now been satisfied. This plan will facilitate the development of the entire precinct including the integrated resort, associated facilities and expansive public realm. Along with these updates, Star’s normalised gross revenue in Sydney for 1H18 was noted to be $959m that is 19.3 per cent up on prior corresponding period basis and EBITDA was $191m that is up by 22.4 per cent on pcp basis. The group’s statutory net profit was significantly impacted by $32 million of items and debt restructuring costs. The group successfully restructured its USPP notes and related hedges in early 1HFY18 to increase the overall debt tenor by almost 3 years and to reduce the interest expenses. SGR has also put in place an additional $100m facility. Group’s operating costs have grown from $425m in 1HFY 2014 to $522 m in 1HFY18, whilst the normalised gross revenue has also grown from $0.9 bn to $1.4 bn over the same period. We maintain our “Expensive” rating on the stock at the current price of $ 5.67, and would review it at a later date.
 

Financial Performance Drivers (Source: Company Reports)
 

Auckland International Airport Limited (ASX: AIA)

Rise in passenger numbers: AIA announced its financial results for the six months ending 31 December 2017. In the first half of the 2018, Auckland and New Zealand’s air connectivity continued to grow by providing new services and new capacity. In the six months to 31 December 17, the total number of passengers increased by 6.4 per cent to about 10 million. Domestic and international passenger numbers were up by 7.7 per cent and 5.8 per cent, respectively. It continued to invest more than $1 million every working day on its core airport infrastructure and there are now 53 aeronautical projects underway across the airport each in excess of $1 million. Group’s total profit after tax for the six months ending December 17 was up by 17 per cent and amounted to $165.9 million. Revenue and EBITDAFI also increased by 6.9 per cent and 6 per cent, respectively. The interim dividend for 2018 is also up by 7.5 per cent and edged to 10.75 cents per share. Its property business continued to grow and completed a new 6,000m building to accommodate the Ministry for Primary Industries.However, compared to its peers, the stock seems to trade at higher levels and looks ‘Overvalued’ at the current price of $6.00
 

Growth Trend (Source: Company Reports)

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