Smartgroup Corporation Limited

H1FY19 NPATA increased by 5% on pcp: Smartgroup Corporation Limited (ASX: SIQ) is engaged in administration outsourcing services, being primarily salary packaging, novated leasing, fleet management and software, distribution and group services. The company recently announced that its director John Prendiville disposed 163,433 shares, sold by Luaga Pty Ltd at $10.94 per share and 64,469 shares by Point Capital Pty Ltd at $11.15 per share, taking the final holding to 655,000 ordinary shares.In another recent update, SIQ announced that Amanda Morgan has resigned as Company Secretary. Jonathan Swain of Company Matters Pty Ltd has been appointed as Company Secretary, effective from August 19, 2019. Sophie MacIntosh, Chief Legal Officer will continue as Joint Company Secretary.

H1FY19 Key Highlights: Revenue for the period was reported at $125.8 million, an increase of 3% as compared to the previous corresponding period. This can be attributed primarily to a net c.5,000 growth in salary packages as well as a c.1,000 growth in the Novated Leasing (NL) carpark. NL settlements were relatively flat compared to prior year, despite a 9% year on year fall in new domestic private vehicle sales.

Profit after tax, as measured by NPATA, for the period was reported at $40.5 million, an increase of 5% as compared to previous corresponding period.The net debt as on June 30, 2019 was reported at $32.5 million with leverage of 0.3 times. The Board of Directors declared a fully franked interim dividend of 21.5 cents per share, representing an increase of 5% from the prior corresponding period, with a record date of 2 September 2019 and payment date of 16 September 2019.


H1FY19 Key Financial Metrics (Source: Company Reports)

What to expect: The company has now secured its 3^rd largest client until 2022. Around 180 clients now use company’s two or more service offerings, delivering a growth of c.20% over the last 12 months.It has entered into 7 new partnerships and signed 5 more in H1FY19. These developments are expected to help the company in delivering a sustainable value for its shareholders in the coming times.

Stock Recommendation: SIQ’s share generated a positive YTD return of 32.0%. Its gross margin, EBITDA margin and net margin for H1FY19 stood at 96.8%, 46.9% and 24.5%, better than the industry median of 39.0%, 20.2% and 11.3%, respectively, implying decent fundamentals of the company. Its ROE for H1FY19 stood at 10.9%, better than the industry median of 9.0%, indicating that the company generated better returns for its shareholders than its peer group. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $10.930, down 4.039% on August 22, 2019.
 

BINGO Industries Limited

FY19 Revenue Posted decent growth of 32.4%: BINGO Industries Limited (ASX: BIN) is involved in providing waste management solutions for domestic and commercial businesses, operate state of the art recycling centres and the manufacture of bins. The company recently released its annual report for the full year of FY19 wherein it highlighted that its net revenue increased by 32.4% to $402.2 million. Its underlying EBITDA increased by 13.2% to $106.1 million. The underlying EBITDA was in-line with guidance, comprising $92.5 million EBITDA from the BINGO business and $13.6 million EBITDA from Dial a Dump Industries (DADI).

The Board of Directors declared a (fully franked) final dividend of 2.0 cents per share to be paid to shareholders, with record date and payment date on August 29, 2019 and September 30, 2019, respectively.Together with the half year dividend of 1.72 cents paid in March 2019, this brings total dividend for the year at 3.72 cents per share.


FY19 Income Statement (Source: Company Reports)

What to expect: BIN completed transformational acquisition of DADI with integration well progressed. It is now on track to deliver annualised cost synergies of $15 million over two years from FY20. Company’s network capacity target of 3.4 million tonnes per annum exceeded in FY19, following the completion of announced development program and acquisition of DADI. As per the release, network reconfiguration plan is progressing well and is expected to return $80 million through the sale of non-core assets and Banksmeadow in FY20.

The company is well positioned for further growth in FY20 with a full year contribution from DADI, Patons Lane and West Melbourne. It is well focused on optimising the core, delivering organic growth and margin expansion over the next 12 months. FY20 guidance will be provided at BINGO’s Annual General Meeting on November 13, 2019.

Stock Recommendation: BIN’s share has corrected ~24% in last one year. The top-line of the company delivered a decent growth over previous year, however, the bottom-line disappointed due to increase in tipping and transportation costs and employees benefit costs. BIN’s ongoing projects and endeavour to optimize its operation are expected to help the company to improve its bottom-line, going forward. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $2.240, down 6.276% on August 22, 2019, owing to the release of FY19 results.

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