Breville Group Limited

Decent Outlook: Breville Group Limited (ASX: BRG) posted decent first half year performance wherein NPAT grew by 7.8% as compared to the prior corresponding period. It was impacted by one off reduction in the Group’s US deferred tax asset due to the US federal corporate tax rate changes. As a result, the Board of Directors declared a 60% franked interim dividend of 16.5 cents per share, representing a dividend rise of 6.5% as compared to the previous corresponding period. On the balance sheet front, the current ratio and quick ratio stood at 1.69x and 1.17x, respectively in 1HFY18 while debt to equity ratio was below than 1x, representing decent liquidity position of the company. Moreover, Bennelong Australian Equity Partners Ltd became the substantial holder of BRG since 7 March 2018 by holding 5.5825 per cent of the voting power. On the other hand, Matthews International Capital Management, LLC, a substantial holder of the group changed its holding from 9.36% of interest to 10.42% of the voting power. Meanwhile, the share price was up by 1.61 per cent in the past three months (as at July 12, 2018), with a rise of 0.177 per cent on July 13, 2018, and the stock currently is trading at a higher level. Hence, we maintain our “Expensive” recommendation at the current market price of $ 11.350, whileEBIT is projected to be approximately 10% for the full year which is in-line with the market consensus. We will review the stock at a later date.
 

Migrating to a Growth - Oriented Business Model (Source: Company Reports)
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Bega Cheese Limited

Strong 1HFY18 Performance:Bega Cheese Limited (ASX: BGA) delivered solid 1HFY18 financials wherein statutory EBITDA grew by 46% to $51.7 Mn and profit after tax growth was 31% to $20.6 million in 1HFY18 as compared to prior corresponding period. The normalized performance of the business was also stronger with an EBITDA growth of 65% to $70.1 Mn and profit after tax growth of 77% to $36.6 Mn during the same period. The one-off costs totalled $16.0 Mn. The first half performance was mainly driven by increase in milk volumes due to a successful milk acquisition event and strong spring intake. But, we expect that this strong spring might not be repeated at the same level in the second half.
 

1HFY18 - Key Highlights (Source: Company Reports)

Further, the company expected continued growth in branded consumer and food service business segment in a highly competitive environment. The company provided guidance for FY18 of a normalized EBITDA of $105 Mn to $115 Mn while observing that there remained acquisition opportunities in both dairy and food in the short term. Meanwhile, the share price has risen 3.87 per cent in the past six months but was down by 2.55 per cent in the past one month as at July 12, 2018. We uphold our “Expensive” recommendation on the stock at the current market price of $ 7.310, considering aforesaid facts and shortcomings while look for more positives and an appropriate entry opportunity.
 

Credit Corp Group Limited

Decent First half Year Performance: Credit Corp Group Limited’s (ASX: CCP) stock tumbled 1.204 per cent on July 13, 2018 while the group is under short-selling radar with over 7.47% short positions. The first half result was strong and the FY18 EPS guidance was confirmed, which is expected to be approximately 130-134 cents despite the stiff competition. During the first half, the company recorded revenue growth of 14% to $147.6 Mn as against prior corresponding period (pcp). The top-line growth was mainly supported by core lending and buying operation during the same period.As a result of this, NPAT has shown growth of 18% to $29.8 Mn as against of $25.2 Mn in 1HFY17. On the balance sheet front, the current ratio stood at 5.28x in the six months as at 31 December 2017 while debt to equity ratio was moderately down to 0.89x in 1HFY18 from the prior corresponding period (0.90x). The company looks to be having a bright prospect for growth, return, and opportunity at the back of loan book growth, increased US purchasing to exploit favourable conditions, reduced core business purchasing to preserve returns, etc.


1HFY18 Financial Highlights (Source: Company Reports)

Meanwhile, the stock price plunged by 20.29% in the past six months as at July12, 2018 and it still trades at a higher level. Hence, we maintain our “Expensive” recommendation on the stock at the current market price of $ 18.050, considering that the recent announcement and positive updates have already been factored in the price.

 
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