Stocks’ Details
 

New Hope Corporation Limited

Low-Cost Operations Provided Solid Results: New Hope Corporation Limited (ASX: NHC) is engaged in coal mining, exploration, port operation, conventional oil, etc. The market capitalisation of the company stood at $1.3 Bn as on 15^th April 2020. Recently, Thomas Charles Dobson Millner made a change to its holdings in the company by acquiring 20,000 ordinary shares at the consideration of $24,105.60 on 27^th March 2020. The continued success of the Bengalla operations has helped the company to deliver revenue amounting to $618 million during 1H FY20 with NPAT amounting to $86 million. NHC currently possess enough funds for current, and future development. 


Financial Results (Source:  Company Reports)

Focus for Future Growth: The focus of the company for future growth revolves around safe and efficient production at existing operations. NHC is also committed to maintain a long-term relationship with its suppliers and customers.

Valuation Methodology: P/BV Multiple Based Relative Valuation

P/BV Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Net margin of the company stood at 11.3% in 1H FY20 as compared to the industry median of 7.0%. This reflects that NHC has decent capabilities to convert its top-line into the bottom-line against the broader industry. Debt to equity of the company stood at 0.22x in 1H FY20 against 0.40x of the industry. We have valued the stock using P/BV based illustrative relative valuation method, and for the purpose, we have taken peers such as Coronado Global Resources Inc (ASX: CRN), Z Energy Ltd (ASX: ZEL) etc., and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Hence, considering the decent capabilities to convert its top-line into the bottom- line and deleveraged balance sheet, we give a “Buy” recommendation on the stock at the current market price of $1.550 per share, down by 0.958% on 15^th April 2020.

Viva Energy Group Limited

Decent Performance of Retail Segment: Viva Energy Group Limited (ASX: VEA) is into manufacturing, distribution and supply of petroleum products to retail and commercial customers. The market capitalisation of the company stood at $2.66 Bn as on 15^th April 2020. During Q1 FY20, the retail segment of the VEA continued to perform well, and the Alliance network attained average sales volumes of 62.4 million litres per week in Q1 FY20. However, the decision of staying at home for people by State and Federal Governments to contain the spread of COVID-19 has impacted Alliance sales volumes down by around 30% to 40%. The below picture provides an overview of refining segment for Q1 FY20:


Refining (Source: Company Reports)

Reduced Capital Expenditure Guidance: For the full-year 2020, the company has reduced guidance for capital expenditure to around $60 million – $80 million. The reduced capital expenditure will primarily allow VEA to preserve cash. 


Valuation Methodology: P/BV Multiple Based Relative Valuation

P/BV Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company is planning to begin an off-market and on-market buy-backs, wherein, it would return cash proceeds of $680 million which it received after realising its investment in Viva Energy REIT in February 2020 to shareholders. We have valued the stock using P/BV multiple based illustrative relative valuation method and for the purpose, we have taken peers such as Beach Energy Ltd (ASX: BPT), New Hope Corporation Ltd (ASX: NHC), Yancoal Australia Ltd (ASX: YAL), etc., and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Thus, in light of the intention of share buyback and decent performance in Q1 FY20, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.350 per share, down by 1.46% on 15^th April 2020. 

Beach Energy Limited

Well-Positioned to Mange Lower Price Environment: Beach Energy Limited (ASX: BPT) is in the production, development and exploration of oil and gas. The market capitalisation of BPT stood at $3.33 Bn as on 15^th April 2020. BPT is well placed to navigate lower oil prices and impact of COVID-19 on the back of prudent financial management, a diversified natural gas business as well as a strict operating discipline. As at 29^th February 2020, the net cash position of the company stood at $151 million. 

Future Guidance: In light of the lower oil price environment as well as the economic effects caused by COVID-19, the company has updated its guidance for FY20, which can be seen in the below picture:


Guidance (Source: Company Reports)

Valuation Methodology: P/E Multiple Based Relative Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:  The company believes that its prudent financial management during the last three years positions BPT in an incredibly strong position in order to handle the current market disruption. Return on equity of the company stood at 11.1% in 1H FY20 as compared to the industry median of 3.8%. We have valued the stock using P/E multiple based illustrative relative valuation method and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Therefore, considering the decent returns provided to shareholders, prudent financial management and increased cash position, we give a “Buy” recommendation on the stock at the current market price of $1.370 per share, down by 6.164% on 15^th April 2020.

 
Comparative Price Chart (Source: Thomson Reuters)

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