Macquarie Atlas Roads Group (ASX: MQA)

Continuous focus on portfolio: MQA announced its full year results for the period ending 31 December 2017 wherein the statutory net profit amounted to A$519.6 million that largely comprised of revaluation gain of A$375.6 million relating to the acquisition of an additional 50% of the economic interest in Dulles Greenways as well as the share of net profit from the MQA’s investment in APRR. Aggregate portfolio traffic grew by 2.7% as compared to the prior corresponding period and was underpinned by the continued traffic growth on the APRR network which was partially offset by the traffic performance at the Dulles Greenway. Proportionate revenue increased by 3.9% and climbed to A$878.2 million that reflected a combination of increased aggregate traffic levels and revised toll schedules which were implemented over the last 12 months. Proportionate EBITDA from road assets increased by 4.8% and amounted to A$652.8 million. 2017 was a transformative year as the company consolidated its portfolio through acquisitions of additional interests in three of four assets and divestment of non-core assets resulted in a simplified investment proposition for securityholders. The stock price moved up about 1.8% post the release of the result and we give a “Hold” recommendation at the current price of $5.54, while the group enhanced its full year distribution guidance by 20%.
 

Earnings Growth Trend (Source: Company Reports)
 

Virgin Australia Holdings Limited (ASX: VAH)

Privatisation not on cards: Down 3.8% on February 28, 2018, VAH has ruled out the privatisation of the group while small investors might be offered a way out via a share buyback. The Board thus approved the implementation of an opt-out buy-back facility for unmarketable parcels of shares, being shareholdings that are valued at less than $500 and the final cost will depend on the number of shareholders who opt out. The cost is estimated to be up to $5.0 million including transaction costs.  Meanwhile, the group released its results for the half year ending 31 December 2017 and the underlying profit has been up 142.3% over the prior corresponding half-year ending 31 December 2016. Revenue and Income increased by 6 per cent from $2,633.7 million in the prior corresponding half-year ending 31 December 2016 and reached to $2,791.0 million for the half-year ending 31 December 2017. No dividends were declared or paid during the half-year ending 31 December 2017 and $25.7 million was the total equity distribution that was paid to non-controlling interests during the half-year. The stock seems to be “Overvalued” at the current price of $0.25
 

EBIT Growth (Source: Company Reports)
 

Ramsay Health Care Ltd (ASX: RHC)

Mixed performance: Australia’s largest private hospital operator, RHC announced a Group Core Net Profit After Tax of $288.0 million for the six months ending 31 December 2017 which is a 7.5% rise on the previous corresponding period. Major restructuring at French operations led the first half net profit fall by 3.7%. Core EPS of 139.0 cents for the half year is an increase of 7.8% on 128.9 cents recorded in the previous corresponding period. The Board declared a fully-franked interim dividend of 57.5 cents, that was up by 8.5% on the previous corresponding period and this will be paid on 29 March 2017. Its Australian operations delivered 9.1% of EBIT growth on the previous corresponding period due to the market volume growth and the benefits of recent cost efficiency programmes. The Company’s brownfield development programme continued strongly and reflected an increase in demand for healthcare services. A further $146M in capacity expansion was approved by the Board during the six months ending 31 December 2017. The Group expects the operating environment in Australia to remain positive while the environment in Europe remains challenging. Barring unforeseen circumstances, it reaffirmed FY18 Core EPS growth of 8% to 10%. The share price declined by about 5.7% on 28 February 2018. Given the scenario and price dip while RHC has a decent long-term potential, we recommend to “Buy” the stock at the current market price of $63.90


NPAT Analysis (Source: Company Reports)
 

Harvey Norman Holdings Limited (ASX: HVN)

Disappointing Result: HVN announced its financial results for the half year ending 31 December 2017 and reported that net profit after tax and non-controlling interests was $207.69 million, much below the figure of $257.29 million recorded in the previous corresponding period and representing a decline of 19.3%. Profit for the period was negatively impacted by a reduction in the net property revaluation increment by nearly $53 million during the half. In October/November, the group finished the first of two stages of the Flagship complex at Auburn in Sydney. In November, it completed the Flagship complex store at Ikano in Kuala Lumpur and the full upgrade of the Flagship store at Wairau Park will be completed by June 2018. The Group’s balance sheet continued to be strong and was anchored by real property assets and a solid working capital position. The value of net assets increased by 4.2% on pcp basis. The Board recommended the payment of fully-franked dividend of 12.0 cents per share and this will be paid in May 2018. The stock price declined by 12.5% on February 28, 2018 at the back of the poor results and involvement in a dispute with its Coomboona JV partner over the repayment of $18.5 million in debt. We recommend to avoid the stock at the current market price of $4.01
 

Noni B Limited (ASX: NBL)

2017 was a year of transformation: Up 5.6% on February 28, 2018, Noni B announced a net profit after tax of $11.8m for the half-year ending 31 December 2017 as compared to $2.5 million for the previous corresponding period. Revenue for the period was $193.2 million, a 35% increase over the previous corresponding period revenue of $143.0 million. Like-for-like sales for the Group grew by 3%. Cash flow was strong and cash-on-hand at 31 December 2017 was $34.1 billion while the bank debt reduced to $21.5 million and placed the Company in a net-cash position. The Board declared a fully franked interim dividend of 9.0 cents per share which is consistent with the Group’s policy of a 60-70% pay-out ratio and this will follow the Group’s dividend of 4.0 cents per share that was fully franked which was paid in October 2017; and was its first dividend since early 2014. During the half, the Group expanded its store network by net 28 stores. Year-to-date like-for-like sales to the end of February remained consistent with the first-half at 3%. With the stock price touching its 52-week high level with a high price to earnings scenario, the same looks “Expensive” at the current market price of $2.26
 

Financial Performance (Source: Company Reports)
 

Vita Group Limited (ASX: VTG)

Interim result exceeded guidance: VTG stock plunged by 8% on February 28, 2018, as the group delivered not-so-encouraging results for the six months ending on 31 December 2017 amidst challenging industry conditions. The Group delivered revenues from continuing operations of $329.6 million that is 4% lower than prior year and EBITDA from continuing operations was $20.0 million representing a decline of 43% on prior year. However, these results were well ahead of guidance that was provided to the market in October 2017 and in line with upgraded guidance which was issued in January 2018. There was some support from the relaxations on the constraints on iPhone 8 and on iPhoneX inventory after launch. The Group maintained its dividend pay-out ratio at 65% of profits after tax and declared fully franked interim dividend of 4.7 cents per share to be paid on 13 April 2018. Vita entered the non-invasive medical aesthetics market and acquired medical-grade skincare brand, Clear Complexions which is performing well and remains on track to deliver annual revenue of around $10.0 million. The Group expects to deliver EBITDA in the range of $38.0 million to $43 million for FY18 and has also absorbed Telstra’s remuneration charges. We have a “Hold” recommendation at the current market price of $1.55
 

Updated Guidance (Source: Company Reports)
 

Mesoblast Limited (ASX: MSB)

Significant improvement in result: MSB provided the market with an update on its operational highlights and with its consolidated financial results for the half year ending 31 December 2017. MSB reported that revenues in the half-year for FY18 significantly increased to US$14.6 million as compared to US$0.9 million in the corresponding period in 2017. Net cash outflows from operating activities for the half-year were reduced by US$11.2 million or by 24% as compared with the half-year of FY17. The Company reported a profit after tax of US$6.7 million as compared to a loss after tax of US$39.8 million for the comparative period. The Company’s first Phase 3 trial reported the successful achievement of its primary endpoint of Day 28 overall response for remestemcel-L in steroid-refractory acute Graft Versus Host Disease. The Group may consider providing other third parties developing mesenchymal lineage cell products in the areas outside of Mesoblast’s core products focus with commercial access to its valuable patent portfolio. The stock price rose by 20.4% in the past six months and by 4.094% on 28 February 2018, and we give a “Hold” recommendation at the current market price of $1.78
 

Cash Flow Position (Source: Company Reports)

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