Stocks’ Details

DuluxGroup Limited

Strong Performance From The Dulux ANZ Business: DuluxGroup Limited (ASX: DLX) announced to have entered a Scheme Implementation Deed (SID) with Nippon. Nippon proposes to acquire 100% of DLX shares for $9.80 by way of a Scheme of Arrangement.

The cash price of $9.80 represents a 27.8% premium to DuluxGroup’s closing price of $7.67 on 16 April 2019, a 32.7% premium to the 1-month VWAP of $7.39 and a 35.4% premium to the 3-month VWAP of $7.24. It also represents implied acquisition multiples of 16.1x FY18 EV/EBITDA, 18.6x FY18 EV/EBIT and 25.3x FY18 P/E.


Full Year Results Summary FY18 (Source: Company Reports)

The reported net profit after tax stood at $150.7 million for the year ended 30 September 2018, an increase of 5.4% over 2017. Its earnings before interest and tax (or EBIT) increased by 4.2% to $223.2 million driven by solid results across all Australian and New Zealand business segments, led by the continued strong performance from the Dulux ANZ business.

What Lies Ahead: Going forward, the company expects moderation in new construction approvals for FY19. Completions are expected to remain at FY18 levels given the pipeline of work. There are expectations that non-residential commercial construction markets would continue to grow, while relevant engineering construction and maintenance markets are expected to be flat overall.

The stock rose by 27.119% during the day’s trade on the back of scheme implementation deed with Nippon. It has generated a YTD return of 18.73%, and it is trading closer to its 52-week high level. We presume that at the current level, the price has discounted all the positive developments. Hence, we give an “Expensive” rating on the stock at the current market price of $9.750 per share (up 27.119% on April 17, 2019).
 

Cimic Group Limited

Trading At Higher P/BV: Cimic Group Limited (ASX: CIM) recently reported substantial increases in cash flow from the operating activities and net cash and work in hand for the three months to 31 March 2019, delivering sustainable returns and cash-backed profit.


Financial Performance -1Q2019 (Source: Company Reports)

The revenue of the company stood at $3.4bn in 1Q19 up 6% Y-o-Y with solid performances across all operating companies.The company maintained stable EBIT, PBT and NPAT margins of 8.2%, 7.3% and 5.3% respectively, driven by a diligent focus on project delivery and cost discipline.

Strong Expected Pipelines: Going forward, the company expects at least $110bn of tenders to be bid and/or awarded in 2019 and around $320bn of projects coming to market in 2020 and beyond, including more than $130bn worth of PPP projects. Moreover, innovation continues to be a priority area for Cimic with an increased focus on digitalisation.

Although the company had strong LTM cash generation and EBITDA conversion, robust financial position, with strong net cash and sound balance sheet, however a probable factoring of positive results and robust financials in its current stock price cannot be denied.

The stock is trading towards its 52-week high price which might be a possible indication that the stock might witness a correction in the near term. Hence, we maintain our “Expensive” rating on the stock at the current market price of $49.400 per share (up 2.405% on April 17, 2019).
 

Regis Resources Limited

Lower Profitability Ratios: Regis Resources Limited (ASX: RRL) recently came up with Rosemont underground update, where the company mentioned to have started the development of underground mine at Rosemont with decline development advanced to over 150 metres. The underground mineral resource increased by 37% to 1.7Mt at a grade of 5.6 g/t Au for 314,000 ounces.

Moreover, a maiden high-grade Central Zone Mineral Resource of 0.2Mt @ 7.5 g/t Au for 50,000 ounces has been defined.The pre-feasibility study returned increased ore tonnes, grade and ounces for a longer life mine and lower AISC of $1,120 per ounce and the underground mine production is estimated to contribute 480,000 – 600,000 tonnes per annum.

Results 1HFY19 (Sources: Company Reports)

In the half-year ended December 31, 2018, the revenues stood at $317.2 million, with 186,276 ounces of gold sold at average price of $1,696 per ounce.The net profit margin of 25% reflected the ongoing profitability of the Duketon operations. The company’s EBITDA amounted to $146.4 million with a very strong EBITDA margin of 46%.

Guidance Going Forward: Duketon operations is on track to achieve the mid to upper end of the annual production guidance of 340,000-370,000 ounces with all in sustaining costs at the mid to lower end of annual cost guidance of $985-$1,055 per ounce.

The stock price of RRL is trading slightly towards the 52-week higher level which could be a possible hint that the current trading juncture had discounted most of the key growth catalysts. Hence, considering the current trading level, we maintain our “Expensive” recommendation on the stock at the CMP of A$4.870 per share (down 2.988% on 17 April 2019) and we advise market players to look out for more growth catalysts.
 

WiseTech Global Limited

Strong Revenue Growth: WiseTech Global Limited (ASX: WTC) has recently completed its share purchase plan (SPP), raising approximately $35.9 million, with approximately 1.7 million new fully paid ordinary shares to be issued to successful SPP applicants at $20.90 per share. During 2019, the company raised a total of $335.9 million, comprising the $300million institutional placement completed on 19 March 2019 and the SPP.


Revenues & EBITDA 1HFY19 (Source: Company Reports)  
    
The total revenue for 1H19 stood at $156.7 million, up by 68%, whereas the net profit attributable to equity holders stood at $23.1 million in 1HFY19, up by 48.0%, which reflects the strategy to accelerate company’s global growth and industry penetration, driven by geographic expansion, relentless innovation and deepening product capability.

Guidance For Key Metrics: The company expects FY19 revenue to be in a range of $322million - $335million, revenue growth of 45% - 51%, EBITDA of $102 million - $107 million and EBITDA growth of 31% - 37%. The company was motivated for the guidance on the back of the strong momentum and significant growth of the Group during 1H19, the power of the CargoWise One platform, annual customer attrition rate of less than 1% and continued relentless investment in innovation and expansion across the global business.

On the YTD basis, the stock posted the return of 36.52% and, in the span of the previous one month, the return stood at 0.30% which reflects some volatility in the returns. Currently, the stock is trading slightly towards its 52-week higher level of $25.0 which might correct in near term. Hence, we put our wait and watch stance on the stock at the current market price of A$21.900 per share (down 5.806% on 17 April 2019).  


 
Comparative Price Chart (Source: Thomson Reuters)   

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