Amcor PLC

AMC Details

Robust Quarterly Performance: Amcor PLC (ASX: AMC) offers a range of packaging related products and services, including packaging for beverages, food, healthcare, and personal and home care, tobacco, and industrial applications. The company has registered a robust Q3FY21. AMC has registered an increase in net sales to US$3,207mn in Q3FY21 as compared with US$3,141mn in Q3FY20 due to volume growth driven by meat, frozen food, pet food, condiments, and fresh food growth in North America. The volume growth has been witnessed across other regions as well among various products. The company has posted a significant increase in its net income to US$270mn in Q3FY21 as compared with US$183mn in Q3FY20.

Dividend Declaration: AMC has declared a dividend of USD 0.1175 (AUD 0.1512) for its shareholders. The ex-date for the dividend is on 25 May 2021 and the dividend payment date is on 15 June 2021. 

1HFY21 Financial Highlights: The company has registered an increase in its net sales to US$6,200mn in 1HFY21 as compared with US$6,184mn in 1HFY20. AMC has posted a significant increase in its net income to US$422mn in 1HFY21 against US$256mn in 1HFY20. The company has posted an increase in its cash and cash equivalent position to US$755mn as on 31 December 2020 against US$743mn as on 30 June 2020.

Cash Position (Source: Company Reports)

Key Risks: AMC deals in the category of consumer products and services, any disruption in the supply chain will lead to decline in sales for the business and may lead to financial loss for the company. The company operates in multiple countries. Any severe movement in foreign exchange prices may lead to financial losses for the company.

Outlook: AMC expects a growth of 10% to 14% in adjusted constant currency EPS for FY21 on an adjusted EPS of 64.2 US cents per share in FY20. The company expects an adjusted free cash flow of ~US$1.0 - ~US$1.1 bn in FY21. 

Valuation Methodology: Price/Earnings Per Share Multiple based Relative Valuation Method (Illustrative) 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of AMC has provided a return of ~2.66% and a return of ~5.18% in the last three months. The current market capitalisation of AMC stands at ~$23.72bn as of 5 May 2021. The stock is currently trading above the average 52-week price level range of ~$13.140-~$16.500. On the technical analysis front, the stock has a support level of ~$14.86 and a resistance of ~$16.441. We have valued the stock using a price/earnings multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering a decline in its other income in 1HFY21 and risks related to supply chain disruption and COVID-19 pandemic. For this purpose, we have taken peers Secos Group Ltd (ASX: SES), Pact Group Holdings Ltd (ASX: PGH), Orora Limited (ASX: ORA). Considering the company has seen an increase in net income, robust Q3FY21 performance, dividend declaration for shareholders, and valuation, we recommend a “Hold” rating on the stock at the current market price of $15.81, up by ~2.729% as on 5 May 2021.

AMC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Decmil Group Limited

DCG Details

Order Book Boosted with a Highway Contract Award: Decmil Group Limited (ASX: DCG) operates through three segments namely Construction and Engineering, Accommodation and Other. The company has announced regarding winning a $25mn highway contract from the Queensland Department of Transport and Main Roads (“DTMR”). DCG will undertake road widening tasks on the Bruce Highway from Gin Gin to Benaraby. DCG has a good track of delivering projects for DTMR in the past, mainly on the Bruce Highway, which resulted in another highway contract awarded to the company.

Change of Director’s Interest: DCG’s director Mr. Peter Thomas has acquired an additional 100,000 ordinary shares in the company as reported on 15 April 2021. Mr. Thomas has acquired the shares for a total consideration of $55,500.

1HFY21 Financial Highlights: The company has registered a decline in its revenue from continuing operations to $165.11mn in 1HFY21 as compared with $236.90mn in 1HFY20. The company has registered profits of $574k in 1HFY21 against losses of $31.44mn in 1HFY20 on the back of lower cost of sales, due to decline in administrative expenses and lower depreciation and amortization expense. The cash and cash equivalent has seen a decline to $29.69mn as on 31 December 2020 against $43.93mn as on 30 June 2020.

Revenue and Profits (Source: Company Reports) 

Key Risks: The company requires regulatory approvals to carry out its banking operations efficiently. Any delay in regulatory approval may result in financial losses for the company. The company is exposed to COVID-19 related risks. The company has seen government projects taking longer than usual due to Covid-19 impacts, resulting in lower profitability of the company.

Outlook: DCG is expecting strong momentum to continue in 2HFY21 after the company has turned around with profits in 1HFY21. The company stands at a strong order book of ~$600mn as reported on 31 December 2020. The company is expecting a positive outlook on Federal Government’s $100bn infrastructure investment plan over 10 years from FY20. 

Stock Recommendation: In the last one month, the stock of DCG has corrected by ~10.92% and by ~7.01% in the last three months. The current market capitalisation of DCG stands at ~$69.51mn as of 5 May 2021. The stock is currently trading below the average 52-week price level range of ~$0.460-~$1.600. On the technical analysis front, the stock has a support level of ~$0.457 and a resistance of ~$0.623. On a TTM basis, the stock of DCG is trading at an EV/Sales multiple of 0.2x, lower than the industry median (Construction and Engineering) of 0.6x. Considering the company has seen a turnaround in 1HFY21 with profits against losses, awarded with a highway contract to boost order book, increasing government infrastructure expenditure, and valuation, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.530, down by ~1.852% as on 5 May 2021.

DCG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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