Class Limited

Decent Quarterly Performance: Class Limited’s (ASX: CL1) stock climbed up 8.293 percent on October 08, 2018 owing to positive sentiments on the stock taking charge once again following the release of Q1FY19 results update wherein the total accounts grew by 3,039 to 172,452 and the total Class customers lifted to 1,413 with a quarterly rise of 46 new customers. As per the release, there were more than 3,800 new Self-Managed Super Fund’s (SMSF) accounts added during the quarter. The impact of around 1,200 funds suspended by AMP delivered a net increase in Class Super accounts of 2,638, taking the total SMSFs to 166,102 for the period. The December quarter is expected to gain momentum due to an increase in the sign-ups in the September month. The company is expecting that the ongoing pressures will accelerate the adoption of Class Super as practices seek efficiency. In September quarter, the Class Portfolio increased by 7% to 6,350 accounts and 31% of Class Super clients use Class Portfolio. On the analysis front, the company recorded FY18 Net margin of 4.2% which is below the industry median of 13.1%. Over the years, CL1 has generated a positive return of shareholders’ fund with ROE at 10.8%, lower than the industry average of 16.4%.
 

Class Super Growth (Source: Company Reports)

On the other hand, the company has recently disclosed the market about the addition of multi-factor authentication (MFA) to its cloud-based products, Class Super and Class Portfolio, for the purpose of enhancing Class’ security framework. In our view, it is an important initiative that addresses one of the major industry concerns with cloud-based systems and ensures to provide an additional security assurance to the users. Meanwhile, the share price has fallen 10.09 percent in the past three months as at October 05, 2018 and traded above the 52-week low level of $1.882. Looking at the Q1 F19 performance, we maintain our “Hold” recommendation on the stock at the current market price of $2.220 while it has crossed and risen above its 50 days’ moving average with an improved medium term outlook.
 

Costa Group Holdings Limited

Healthy outlook post decent performance in FY18:Costa Group Holdings Limited (ASX: CGC) has recently reported decent FY18 performance in which revenue grew by 10.2 percent to $1,002 Mn as against $909 Mn in last year. The sales spiked up due to product mix growth during the same period. Resultantly, EBITDA before SGARA and materials items increased substantially by 30.9% to $150.8 Mn in FY18 as compared to last year. NPAT before SGARA and materials items lifted by 26.3% and amounted to $76.7 Mn in FY18. Based on solid performance, the Board of Directors declared a fully franked final dividend of 8.5 cents per share for its shareholders and it was paid on October 04, 2018. This summarized a total dividend payment of 13.5 cents per share for the full year, representing 22.7% growth on FY2017. Valuation-wise CGC looks decent with Net Margin at 11.8% in FY18 compared to 6.3% in FY17. Return to the shareholders has also been good with ROE coming in at 27.0%. Operating margin, on the other hand, has increased by 9.7% compared to 7.6% in FY17. We expect that the company has a decent outlook ahead at the back of continuously building its capacity and market positioning in both the domestic and international market. However, based on the current trading conditions, the company expects to generate low double-digit NPAT-S growth in the year ahead to 30 June 2019.


FY18 Financial Highlights (Source: Company Reports)

On the other hand, the group announced that ithas changed its financial year-end from June to December each year, thereby adopting a calendar year reporting cycle. In order to do this, the Company will operate a six-month interim fiscal period commencing from 2nd July 2018 and ending 30th December 2018 and thereafter it will revert to a calendar year cycle for 2019 (CY2019). Meanwhile, the share price has fallen 13.34 percent in the past three months as at October 05, 2018 and traded close to reasonable PE level of 18.56x in comparison to peers. Based on foregoing, we maintain our “Hold” recommendation on the stock at the current market price of $6.74.
 

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