BHP Billiton Limited

Healthy Revenue Growth and Decent Margin Cycle: BHP Billiton Limited (ASX: BHP) is one of the leading producers of natural resources in the world. It has four main verticals i.e., Petroleum, Copper, Iron ore and Coal which contributed around 16.5%, 29.3%, 33.2%, and 18.6%, respectively, of the total revenue in 1HFY18. BHP’s revenue during 1HFY18 was recorded at $21,779 Mn against $18,796 Mn in 1HFY17, marking a growth of 15.9% YoY (year on year) on the back of mixed products growth and pick up in commodity prices. Underlying EBITDA rose to $11,238 Mn in 1HFY18 from $9,896 Mn in 1HFY17, representing growth of 13.6% YoY. Underlying EBITDA margin down by 105 bps to 51.6% from 52.6% in 1HFY17 because of higher commodity prices and healthy operating performance. Attributable profit for the first half year stood at US$ 2.0 Bn, down by 37% as compared to previous year on the back of exceptional loss due to the recent US tax reform and Samarco dam failure. Despite mixed performance during first half year, the board of the company announced to pay an interim dividend of 55 US cents per share (up 38%) that includes an additional amount of 17 cents per share, which is above 50% of the minimum pay-out policy of the company. The company had a free cash flow of US$ 4.9 Bn in 1HFY18. Considering that BHP stock price rose by 9.3% in the past three months and it is not the time to buy the stock, the potential still looks good at the back of commodity price scenario and group’s fundamentals. Thus, we give a “Hold” recommendation at the current market price of $29.42
 

Margin Cycle (Source: Company Reports)
 

Webjet Limited

Strong growth in higher margin products: Webjet Limited (ASX: WEB), a digital travel business with strong presence in both its markets i.e., global consumer market through B2C and wholesale market through B2B, has taken a spotlight this reporting season. In the 6-month period to 31 December 2017, the Company delivered a significant rise in all key financial metrics over the prior corresponding period with Total Transaction Value (TTV) of $1443 Mn vs $932 Mn in 1HFY17, marking a growth of 55% YoY. Total revenue from continuing operation showed strong growth of 290% YoY to $359.8 Mn in 1HFY18 from $92.3 Mn in 1HFY17. EBITDA and NPAT for 1HFY18 rose by 63% and 25%, respectively. Further, the ongoing growth of the Webjet OTA business with flight bookings is continuing to outperform by more than 4 times and expects to deliver strong growth in coming years through higher margin ancillary products. The company is currently the fastest growing B2B player in the world, significantly outperforming market growth rates in all regions and continuing to gain market share among peer groups. However, its statutory EPS decreased by 55% and edged to 16.5 cents and whereas EPS from continuing operations increased by 9% and amounted to 17.8 cents. On the back of the overall performance, the board of the company declared an interim dividend for six months ending 31 December 2017 of $0.08 per share and this was fully franked totalling to $9.5 Mn. Moreover, FY18 EBITDA guidance is on track to deliver more than $3 Bn TTV. Meanwhile, the stock price was up by 30.69% in the past three months and it looks “Expensive” at the current market price of $11.97, looking at the trading levels in comparison to its peers.
 

Continued Booking Growth Across All Businesses (Source: Company Reports)
 

Emeco Holdings Limited

Poised for Growth:Emeco Holdings Limited (ASX: EHL) offers heavy earthmoving equipment rental solutions and maintenance services to mining companies and contractors in Australia and Canada. Group’s operating revenue during 1HFY18 was recorded at $171.1 Mn against $73.6 Mn in 1HFY17, marking solid growth of 132.5% Year on Year (YoY). The revenue uplift was due to improved operating performance and the six-month contribution from the acquisition of Andy’s Earthmoving Equipment (Asia Pacific) Pty Ltd and Orionstone Holding Limited. EBITDA came at $67 Mn in 1HFY18, which is a marking growth of 140.1% YoY on the back of cost optimization strategy and strong revenue growth during the same period. NPAT stood at $14.4 Mn in 1HFY18, positive for the first time since 2HFY13. The net-debt-to-EBITDA ratio is also on its declining path.

The company continues to execute on its strategy to become a high quality and low-cost provider of mining rental equipment solutions business. The outlook for the remainder of FY18 and beyond is positive due to improved market scenario that have resulted into project wins and rise in demand for equipment. This company has not paid any dividends during 1HFY18. However, the company seems to be poised for exponential growth in the forthcoming years on the back of profitability growth, debt reduction and decent balance sheet. We recommend EHL as a “Speculative Buy” at the current price of $0.29
 

Improving Financial Performance (Source: Company Reports)

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