Stocks’ Details
 

Aristocrat Leisure Limited

 
ALL to Settle Washington Lawsuit: Aristocrat Leisure Limited (ASX: ALL) is engaged in designing, manufacturing, developing, and marketing of electronic gaming machines, casino management systems and digital social games. In a recent update, the company entered a contract in principle to resolve the two lawsuits in Washington State, pertaining to the online social gaming platforms Big Fish Casino, Jackpot Magic Slots and Epic Diamond Slots, offered by Big Fish Games acquired from Churchill Downs Incorporated in January 2018. As per the agreement and subject to the approval of District Court, CDI and ALL together would pay a total of USD$155 million into a settlement fund, out of which Aristocrat would pay USD$31 million.
 
1HFY20 Key Financial Highlights for the Period Ended 31 March 2020: During the period, the company’s operating revenue amounted to $2251.8 million, up 7% on prior corresponding period revenue of $2105.3 million. EBITDA for the period stood at $707.6 million, down 7.7% on pcp. Normalised profit after tax and before amortisation of acquired intangibles (NPATA) stood at $368.1 million, down 12.8% in reported terms. Reported results were also positively impacted by recognition of a $1 billion deferred tax asset. During the period, the company’s operating cash flows went up more than 40% and stood at $620 million.  The company has strengthened its balance sheet with net leverage reducing to 1.4x as at 31 March 2020, from 1.6x in the pcp.
 
 

Financial Performance (Source: Company Reports)
 
COVID-19 Update: In a recent update, the company stated that given the current uncertainty owing to coronavirus led crisis, it has suspended its interim dividend.
 
Valuation Methodology:P/E Multiple Based Relative Valuation (Illustrative)

 P/E Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of the company generated a positive one month return of 20.76% and is currently trading slightly above the average of its 52-week low-high trading range of $14.81 - $38.23. The company has a P/E ratio of 10.25x, with a dividend yield of 2.1%. In 1HFY20, ALL reported a net margin of 12.8%, which is higher than the industry median of 7.8%. We have valued the stock using P/E multiple based illustrative relative valuation method and, for the purpose, we have taken peers such as Star Entertainment Group Ltd (ASX: SGR), Crown Resorts Ltd (ASX: CWN), and Skycity Entertainment Group Ltd (ASX: SKC). As a result, we have arrived at a target price with limited upside (in percentage terms). Therefore, considering the current trading level and uncertainty owing to coronavirus led crisis, we have a watch stance on the stock at the current market price of $26.72 per share, up 0.3% on 27 May 2020.

 
Flight Centre Travel Group Limited

 
TTV up ~11% Year Over Year: Flight Centre Travel Group Limited (ASX: FLT) is engaged in travel retailing in the leisure and corporate travel sectors. Recently, the company stated that Colette Mary Garnsey, one of the directors in the company, has acquired 1,725 ordinary shares for a consideration of $7.20 per share.
 
FLT Approves to Sell St Kilda Road Property: On 7 May 2020, FLT agreed to sell its Melbourne head office property to Shakespeare Property Group for a consideration of $62.15 million. The sale is likely to be completed in July this year. The company had bought the property at 436 St Kilda Road for $32 million in 2008.
 
FLT Finalises Retail Entitlement Offer: In another update, the company stated that it has successfully completed the retail component of its 1 for 1.74 accelerated pro rata non-renounceable retail entitlement offer. The offer raised $138 million at $7.20 per share, which will be utilised to strengthen the company’s balance sheet and liquidity position.
 
1HFY20 Key Highlights for the Period Ended 31 December 2019: During the period, the company’s revenue went up by 5.8% year over year and came in at $1,546 million. Group TTV stood at $12,399 million, up 11.2% year over year, due to solid growth across all regions. 
 

Rising TTV Highlights (Source: Company Reports)
 
Valuation Methodology:P/BV Multiple Based Relative Valuation (Illustrative)

P/B Multiple Based Relative Valuation Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of FLT is inclined towards its 52-weeks’ low level of $8.56, proffering a decent opportunity for accumulation. The stock has corrected ~54.77% and ~62.84% in the last three months and six months, respectively. The company has an annual dividend yield of 9.68%. Despite the current challenges put forward by COVID-19, the company aims for both operational and financial stability in the long-term. Considering the trading levels and decent financial performance, we have valued the stock using P/BV multiple based illustrative relative valuation method and have arrived at an indicative target price with an upside of low double digit (in percentage terms). For the purpose, we have taken peers such as Corporate Travel Management Ltd (ASX: CTD), Helloworld Travel Ltd (ASX: HLO), and Qantas Airways Ltd (ASX: QAN). Considering, the above factors and current trading levels, we recommend a ‘Buy’ rating on the stock at the current market price of $13.74, down by 3.579% on 27 May 2020.
 

Super Retail Group Limited

 
SUL Witnessed 1.7% Sales Growth on a Like for Like Basis: Super Retail Group Limited (ASX: SUL) manages specialty retail stores in the automotive, tools, leisure, and sports categories. In a recent update, the company stated that Mitsubishi UFJ Financial Group, Inc, a substantial holder of the company, has decreased its voting power from 7.59% to 6.04%.
 
1HFY20 Key Highlights: Despite the impact of bushfires as well as peak level of drought, the group managed to deliver total sales amounting to $1.44 billion during 1H FY20 with like for like sales growth of 1.7%. Supercheap Auto and Rebel segment experienced growth of 3.7% and 3.6% in top-line, respectively.
 

Group like-for-like trading update (Source: Company Reports)
 
Trading Update: The company provided a like-for-like trading update for the period ended 21 March 2020, wherein, SUL has preserved positive sales momentum in two of its biggest brands and has benefitted from a diversified portfolio of businesses with store locations in metropolitan as well as regional areas across Australia and New Zealand. The company further ensured that Australian stores are currently trading. Notably, due to the ambiguity in relation to the COVID-19 outbreak, the company has suspended its FY20 interim dividend of 21.5 cents per share. Further, the company assured credit authorisation for a new $100 million bilateral liquidity facility with ANZ Bank.
 
Valuation Methodology:Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of SUL is trading above the average of its 52 weeks low and high price of $3.020 - $10.540. The stock has corrected ~3.09% and ~17.62% in the last three months and six months, respectively. The company has an annual dividend yield of 5.91%. We have valued the stock using price to earnings multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in percentage terms). Considering the above factors, recent measures to manage its liquidity position, and current trading levels, we are giving a “Hold” recommendation on the stock at the current market price of $8.29, down by 2.009% on 27 May 2020.

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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