Qantas Airways Limited

 
QAN Details

Renewal of codeshare agreement between Air France and Qantas:Qantas Airways Limited’s (ASX: QAN) stock surged up 11.09 per cent in the past one month as on May 30, 2018 with a boom in travel and tourism sector and decent performance. The group’s third quarter total revenue has also surged 7.5% on prior period. QAN aims to provide seamless travel experiences while the group updated the market about the progress on several transactions under its ongoing buy-back event.The company intends to buy back shares with an aggregate consideration of $378 Mn. QANconsiders a disciplined approach to allocating capital with the aim to grow invested capital and return surplus capital to its shareholders. Recently, the group has renewed its codeshare agreement with Air France to offer more travel options between Australia and France. According to the reciprocal deal, Qantas will add its code to flights operated by Air France between Singapore and Hong Kong and Paris-Charles de Gaulle, as a continuation of flights from Sydney, Brisbane, Melbourne, and Perth. With this drive, Air France customers will be able to access codeshare services from Sydney to five cities on the Australian airline’s domestic network i.e., Canberra, Hobart, Adelaide, Cairns, and Darwin. This will provide the strengthening of core airline partnerships and support to reduce earnings volatility.


Disciplined Allocation of Capital to Increase Shareholder value (Source: Company Reports)

Hence, we expect that new and existing international routes will add to top-line growth in years to come. Based on ongoing transformation, capacity discipline and positive market condition, we give a “Buy” recommendation on the stock at the current market price of $ 6.35. The stock is also expected to get boost from current oil price scenario.
 

QAN Daily Chart (Source: Thomson Reuters)
 

TPG Telecom Limited

TPM Details

First of a kind of Mobile Offer that could be a Game Changer:Since couple of months, TPG Telecom Limited (ASX: TPM) is in limelight at the back of launch of an exciting mobile offer that indicates free unlimited mobile data on its Brand-New Australia Mobile Network for the first 6 months, thereafter, it will be charged at the price of $9.99 per month. This offer is expected to be available in Q3-Q4 2018. Hence, we expect that this unlimited mobile strategy will be a game changer for the entire telecom industry and is believed to enhance TPM’s subscriber base in the upcoming period, thus resulting into topline growth of the company. Over the period, the group has developed a reliable distribution network that can reach the majority of its potential market. However, the group has delivered another strong cash flow result in 1HFY18 with $ 417.2 Mn cash generated from operations (pre-tax). At the end of 1HFY18, the group had bank debt (net of cash) of $1,394.3 Mn, which represents a leverage ratio of ~ 1.7x EBITDA, and had undrawn headroom of over $900 Mn in its debt facilities to fund its remaining mobile network investment. While the share price has fallen 7.93% in the last one year as at May 30, 2018, the group might be able to touch the upper limit of its underlying EBITDA guidance which is in the range of $825-$830 Mn for the full financial year. Hence, we continue to maintain our positive outlook on the stock and recommend a “Buy” at the price of $ 5.57 (up 2 per cent on May 31, 2018).
 

TPM Daily Chart (Source: Thomson Reuters)
 

Collins Foods Limited

CKF Details

Increased Footprintin Asia Region: Collins Foods Limited (ASX: CKF) is an Australian listed public company which operates food service retail outlets. During the first half of the year, the group has completed acquiring five out of 28 KFC restaurants from Yum! while remaining 23 are to be completed in the second half of the year. Based on ongoing development related to expanding footprints in Asia region and increased store counts over the period, CKF is expected to witness growth in years to come.  Besides this, the group has recently launched the first Taco Bell Restaurant in Queensland and it traded well which is above expectations. As a result, the group has two further stores scheduled to open this calendar year. If the following stores turn out to be as fruitful as CKF’s initial Annerley restaurant, we expect significant meaningful store roll-out in years to come to add value to the group. Hence, we give a “Buy” recommendation on the stock at the current price of $ 5.520.
 

CKF Daily Chart (Source: Thomson Reuters)
 

Scentre Group

SCG Details

Update on Buy-back events:Scentre Group (ASX: SCG) has recently updated the market about the progress on several transactions under its ongoing buy-back event. The company intends to buy back shares with an aggregate consideration under A$700 million. Besides this, the group has maintained its FY18 guidance for full-year growth in funds from operations of approximately 4 per cent while distribution guidance has been set at 22.16 cents per security. The REIT is expected to get support from population growth, employment growth, and household cashflows. Based on strong financials along with organic and inorganic growth, and predictable dividend stream while 99.5% of group’s portfolio is leased, we give a “Buy” recommendation on the stock at the current market price of $ 4.180.


SCG Daily Chart (Source: Thomson Reuters)
 

Countplus Limited

CUP Details

Decent Balance Sheet:Countplus Limited (ASX: CUP) has recently appointed Mr. Mark Chapman as Chief Operating Officer of the group, effective from 4th June 2018. In that role, he will be responsible for implementing the firm’s value proposition and growing the network of firms under the “Owner-Driver”, Partner’s Model wherein both parties must be equally committed, and they will share compatible cultures and goals. On the other hand, total financial solutions Australia, a wholly owned subsidiary of Countplus limited, announced the lifting of conditional license requirement by Australia Securities and Investment Commissions (ASIC). Following this, the group is now continuing to pursue its strategy for growth and revitalization of the company and to support the ongoing strength of its member firm community nationwide. On the balance sheet front, the Quick Ratio improved from 1.24x to 1.28x and Debt-Equity Ratio also improved from 0.43x to 0.25x in one year as at 31 December 2017, representing healthy liquidity position of the firm. The group is undergoing transformation to become a leader in professional accounting and advice firms and realizes its growth objectives. Further, the new management team, a refreshed Board, a clear strategy and disciplined approach will help to execute its strategy for positive change. Hence, we give a “Speculative Buy” recommendation on the stock at the current price of $ 0.670.
 

CUP Daily Chart (Source: Thomson Reuters)
 

Collection House Limited

CLH Details

Full Year Guidance for Investment in Purchase Debt Ledgers:Collection House Limited (ASX: CLH) has upgraded its FY18 Purchase Debt Ledger (PDL) guidance for the second time.Initially, the group expected between $63 - $65 million, then upgraded to $70 - $75 million and later updated it to be $80 - $84 million. The increase in the full year PDL investment is due to the Company taking strategic steps to leverage the opportunities that have arisen from the requirement for Australian Banks to fully comply with the provisions of AASB 9 from 1 January 2018. Further, the group continues to buy at pricing levels that are within the historical range but expect to generate higher returns due to improvements in collection efficiencies, technology adoption, and improved data analysis. ROE improvement for the group to 4.3 per cent as at December 2017 is more than industry median (3.6 per cent). The gross margin stood at 81.9 per cent in 1HFY18 which is above the industry median (45.6 per cent). Currently, the stock is trading at a low PE level among its peer group, hence we give a “Speculative Buy” recommendation on the stock at the current market price of $ 1.650.
 

CLH Daily Chart (Source: Thomson Reuters)
 

Emeco Holdings Limited

EHL Details

Long-Term Issuer Default rating Upgraded: Recently, Emeco (ASX: EHL) informed the market that Fitch Ratings (Fitch) has upgraded Emeco’s Long-Term Issuer Default Rating to “B” from “B-“. The upgraded rating reflects Fitch’s view that Emeco’s financial performance is improving, recent acquisitions (including the acquisition of Matilda Equipment) are strengthening the balance sheet and the company is committed to deleveraging. It’s financial results for 1H18 reflected a significant improvement of 140 per cent in operating EBITDA as compared to 1H17, amounting to $67.0 million; and operating EBITDA margin for 1H18 was 39.2 per cent as compared to 37.9 per cent in 1H17. Based on the foregoing, we give a “Speculative Buy” recommendation on the stock at the current market price of $ 0.350 (up 2.941% on May 31, 2018), as the Company seems to be gearing up on its potential and regaining the lost momentum at the back of several acquisitions.
 

EHL Daily Chart (Source: Thomson Reuters)
 

Resolute Mining Limited

RSG Details

Strong Fundamentals:Up 4.2% on May 31, 2018, Resolute Mining Limited (ASX: RSG) has recently acquired 15% stake in Orca Gold with the objective of expanding its project pipeline and provide a source of medium-term potential growth opportunities. Moreover, it is expected that a few important milestones will be delivered during the current quarter and RSG is expecting to receive Environmental Approvals at Bibiani and will soon publish an updated feasibility study based on the recently upgraded resource. ROE improved in FY17 and was above the industry median. Meanwhile, the stock price was up by 17.24% in the past six months as at May 30, 2018 and is trading at a low PE level among its peer group. Hence, we continue to maintain our “Buy” recommendation on the stock at the current market price of $1.240, considering the ongoing development such as acquisition with Orca Gold, healthy balance sheet, robust return ratio and resilience during volatile conditions.
 

RSG Daily Chart (Source: Thomson Reuters)

 
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