Stocks’ Details

Tabcorp Holdings Limited

Cost Synergies to support EBITDA growth: Tabcorp Holdings Limited (ASX: TAH) provides gambling and entertainment services. The company recently updated that TAH and its subsidiary UBET Qld Limited (together the Company) have been served with a statement of claim by Racing Queensland. The claim has been lodged in the Supreme Court of Queensland. The Company also mentioned that the dispute is related to the calculation of fees after the introduction of point of consumption tax in Queensland. The Company is reviewing the issues and is of the view to defend its position vigorously.

Key Highlights of 1H FY19 Results: TAH recorded decent results from continuing operations with top-line growth at 6.1% and EBITDA growth of 9.0% (vs pro-forma pcp), which was broadly backed by solid results from lotteries and Keno performance from game innovation, and digital &retail growth. Results were positively impacted by the full period contribution from the Tatts Group. EPS (earnings per share) for the period at 9.1 cents was up from 2.6 cents in pcp.

Group Results (Source: Company Reports)

The integration program by the company is progressing well. With the revision for synergy targets, the company has delivered $24 million of EBITDA from synergies and business improvements in 1HFY19. TAB is expected to deliver EBITDA of $55 million from cost synergies in FY19, which is up from the previous projection of $50 million. The overall FY 2021 target is between $130 million and $145 million. The management has upgraded cost synergies target to $95 million from $80 million. The company believes that UBET will be a different business in FY21 and has commenced its transition to the full TAB offering.

Stock Recommendation: Long-term growth path for the combined business, company’s focus towards profitable growth in revenue market share over time, full integration of UBET with TAB in late FY20, etc., augur well for the growth, going forward.

At the current market price of $4.450 per share, annual dividend yield for the stock stands at 4.72%. Considering the above-mentioned facts, we recommend a “Buy” rating on the stock at the current market price of $4.450 per share (down 0.67% on 28 June 2019).  


TAH Daily Chart (Source: Thomson Reuters)
 

National Australia Bank Limited

Expense Growth To Be Flat In FY19 & FY20; Witnessing Higher Liquidity Ratios: National Australia Bank Limited (ASX: NAB) is one of the leading banks in Australia with the major segment as Business & Private Banking, Consumer Banking & Wealth Management, etc. The Bank recently updated that it will release its FY19 third quarter trading update on 14 August 2019.

The Bank recently announced ordinary fully paid dividend of AUD 0.8300 with ex and payment date of May 14, 2019 and July 3, 2019, respectively.

The Bank also updated that NAB and its associated entities have been ceased to be the substantial holder in Nine Entertainment Co. Holdings Limited.

1HFY19 Results Highlights: Bottom-line posted a growth of 4.3% to $2,694.0 million during the period with an increase of 1.0% excluding the impact of discontinued operations.


Net Stable Funding Ratio Movement (Source: Company Reports)

The cash earnings stood at $2,954 million. The common equity tier 1 (CET1) capital ratio at 10.40%, which is mildly below the APRA’s strong target of 10.5%. The LCR (liquidity coverage ratio) came in at a quarterly average of 130.0% with NFSR (net stable funding ratio) at 112%.

Outlook and Stock Recommendation:Going forward, the Bank targets broadly flat expense growth for FY19 and FY20 excluding large notable expenses.

The stock yielded a YTD return of 13.08%. On the face of economic challenges, the Bank exhibited decent performance coupled with strong key ratios. Considering the reorientation culture towards customers, productivity benefits, better lending growth, etc, we give a “Buy” recommendation on the stock at the current market price of $26.720 per share (down 0.112% on 28 June 2019).


NAB Daily Chart (Source: Thomson Reuters)
 

Perpetual Equity Investment Company Limited

Majority of Capital Invested in Securities:Perpetual Equity Investment Company Limited (ASX: PIC) is an investment company, operating majorly in Australian listed securities. In the net tangible assets statement as at 26 June 2019, the company reported NTA before tax amounting to $1.134 and NTA after tax amounting to $1.117.

Monthly investment update for May 2019:The company reported returns of 8.4% from its investment portfolio since inception. Over a period of 1 month, the returns reported a growth of 2.4%. The company declared an interim dividend of 3.1 cps for FY19 with an annual dividend yield of 6.27%. Investment allocation comprised of 80% in Australian securities, 3.9% on global securities and the remaining 16.1% in cash. The company’s top five Australian listed securities were Commonwealth Bank of Australia, Westpac Banking Corporation, Suncorp Group Limited, Telstra Corporation Limited and Woolworths Group Ltd. Top three global listed securities included Flutter Entertainment Plc, Siemens AG and Takeda Pharmaceutical Co. Ltd. The financial sector comprised the largest share in the portfolio at 30.9%.


Dividend Yield (Source: Company Reports)

Portfolio Sectors (Source: Company Reports)

Outlook: The company expects an increase in current low valuation with the further simplification of actions. Though the simplification will take a few years, it is expected to generate high rewards in the future. The company is progressing towards owning one of the world’s greatest industrial assets.

Stock Recommendation:The stock of the company generated returns of 3.48% and -0.95% over a period of 1 month and 3 months, respectively. Considering the returns for short-term and long-term portfolio performance and an annual dividend yield of 6.27%, we give a “Buy” recommendation to the stock at a current market price of $1.040, up 1.961% on 28 June 2019.


PIC Daily Chart (Source: Thomson Reuters)
 

Scentre Group

Distribution Per Security to Rise in 2019: Scentre Group (ASX: SCG) is involved in long term ownership of shopping centres. Recently, the company updated on change in the interest of a substantial shareholder. The voting power of BNP Paribas Nominees Pty Limited increased from 7.58% to 8.59%. In another recent announcement, the company updated on the recent buy-back program for securities worth $800 million.

The company recently sold out Sydney CBD office towers to some funds managed by Blackstone at a consideration of $1.52 billion. The transaction has helped release capital for pursuing the company’s strategic objectives.

Highlights of Q1FY19: During the quarter ended 31 March 2019, the company completed 448 lease deals with a lease deal area of 71,084 sqm. The number of customer visits also continued to increase with more than 535 million visits per annum. Over a period of 1 year to 31 March 2019, the company reported a rise of 1.7% in total speciality in-store sales. Total portfolio sales went up by 1.3% at $24.1 billion (moving annual turnover). The company continued to enhance its platform through Westfield Newmarket redevelopment in Auckland, which is expected to open in stages during the second half of the year.


Highlights of Westfield Newmarket (Source: Company Reports)

Outlook: The company reconfirmed the forecasted Funds from Operations growth for 12 months ending 31 December 2019 of approximately 3%. The distribution for 2019 is anticipated to be 22.60 cents per security with an increase of 2%.

Stock Recommendation: The stock of the company generated returns of -2.29% and -6.80% over a period of 1 month and 3 months, respectively. In Q1FY19, the company reported a rise in total portfolio sales and total speciality in-store sales. It has also undertaken development activity for Westfield Newmarket to further enhance its platform. Distribution guidance for FY19 is also higher by 2% on the previous year. Hence, considering the above factors, we give a “Buy” recommendation on the stock at a current market price of $3.840, down 3.275% on 28 June 2019.


SCG Daily Chart (Source: Thomson Reuters)
 

Praemium Limited

Highest Net Platform Inflows on Record: Praemium Limited (ASX: PPS) is a leading provider of managed accounts technology, portfolio administration and financial planning tools to the wealth management industry. The company recently updated that since the launch of its non-custodial VMA Administration service 18 months ago, the funds under administration have grown to over $6 billion. The company had launched the service as a supplement to its non-custodial Virtual Managed Account (VMA) solution, currently managing over $100 billion in assets.

Key Highlights of March Quarter: In the quarterly update for March 2019, the company reported combined quarterly gross platform inflows amounting to $744 million. Gross platform inflows from UK/International division were the highest on record at $234 million. For the first time in the company’s history, it reported net platform inflows of $438 million.

During the period, the company generated incremental revenue amounting to $2 million on account of the expansion of its Virtual Managed Account reporting solution to Morgan Stanley Wealth Management and extension of VMA reporting and administration solution to Shaw and Partners.


Gross Inflows (Source: Company Reports)
 
Stock Recommendation: The company’s stock generated returns of 3.90% and -33.33% over a period of 1 month and 3 months, respectively, with the market capitalisation of ~$149.96 million. During the March quarter, the company reported decent results with record net platform inflows and highest ever gross platform inflows from UK/International division. Extension of its offerings led to incremental revenues during the period that further strengthened the financial position. PPS’ share is currently trading close to its 52 weeks low level of $0.320, proffering a decent opportunity for accumulation. Given the above factors and the Non-custodial admin FUA growth, we give a “Speculative Buy” recommendation to the stock at a current market price of $0.400, up 8.108% on 28 June 2019.


PPS Daily Chart (Source: Thomson Reuters)
 

Helloworld Travel Limited

Australian Segment Reports Decent TTV Growth: Helloworld Travel Limited (ASX: HLO) is engaged in selling of international and domestic travel products and services. It also operates retail distribution networks of travel agents. The company recently updated that it is extending the agreement between Department of Finance and QBT Pty Ltd in relation to Travel Management Services for Australian Government for a period of 2 years starting 1 July 2019 till 30 June 2021.
In another recent update, the company made an announcement regarding some mid to large size corporate agencies joining its New Zealand retail network. The company expects the combined annualised TTV from the expansion to be approximately NZ$300 million. In another strategic step to expand its offerings, the company acquired the Williment Travel Group, one of the key sports travel specialists in New Zealand.

Highlights from Trading Update: The company reported a total transaction value of $4.71 billion for the 9 months period to 31 March 2019. This depicted a rise of 8.8% on pcp value of $382.8 million. Revenue during the period, reported a rise of 8% at $260.5 million. TTV for the Australian segment grew at the rate of 10.3%, followed by New Zealand at 2.4%. During 1HY19, revenue from Australian segment increased by 14.9%.


Segment Revenue & EBITDA (Source: Company Reports)

FY19 Guidance: The company reaffirmed full-year EBITDA guidance for FY19 in the range of $76 million and $80 million.

Stock Recommendation: The 9 months period to 31 March 2019 depicted growth in total transaction value and revenue, with the Australian segment recording good growth. EBITDA to revenue margin also increased to 21.1% against 19.8% in pcp. The increase in business size and resultant economies of scale through acquisitions in New Zealand are likely to assist to achieve the targeted EBITDA to revenue of 25% in FY20. Given the backdrop of aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of $5.070, down 0.588% on 28 June 2019.    
    

HLO Daily Chart (Source: Thomson Reuters)
 
Elmo Software Limited
DecentOutlook: Elmo Software Limited (ASX: ELO) is a leading cloud, SaaS, HR and payroll solutions provider in Australia and New Zealand. The company recently updated that 40,061,751 shares subject to ASX imposed escrow and 1,587,083 shares subject to voluntary imposed escrow, were expected to be released on 29 June 2019. In addition, 396,557 shares are expected to be released from voluntary escrow on 1 July 2019.
Third Quarter Update: The company reported strong cash receipts during the period of $9.5 million, up 29% on pcp. The period was marked by the launch of payroll in New Zealand. The period also saw the acquisition of HROnboard and BoxSuite in January 2019 along with a pipeline of other acquisition opportunities.

Customer Receipts (Source: Company Reports)

According to the management, the company is well capitalised and in a good position to avail strategic opportunities with a total addressable market opportunity of $1.7 billion, which is 3 times the size during its IPO in 2017.Having touched ~9% of the market so far, the company has significant scope for sustained long term growth.

Stock Recommendation:The stock of the company generated returns of 26.32% and 39% over a period of 3 months and 6 months, respectively. Currently, the stock is trading slightly towards its 52-week higher level of $8.510 with the market capitalisation of $455.27 million. Lately, the company has expanded its product suite and extended its market opportunities for sustainable, long-term growth. The current year might see further investment for the development of the company’s sales and marketing resources, leadership and product leadership. Considering the small market share, the company still has scope for significant growth in the long run. Hence, we give a “Speculative buy” recommendation to the stock at a current market price of $7.290, up 1.25% on 28 June 2019.


ELO Daily Chart (Source: Thomson Reuters) 

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