Stocks’ Details

REA Group Ltd

Witnessed 2% Operational Efficiencies from Robust Cost Management: REA Group Ltd (ASX: REA) is a multinational digital advertising business specialized in the property business. The company recently informed that it would declare its results for the half-year ended 31 December 2019 on Friday, 7 February 2020.

Q1FY20 Operational Highlights: For three months ended 31 December 2019 or Q1 FY20, the company reported revenue of $202.3 million, down 9% on y-o-y basis. For the same time span, EBITDA of REA came in at $114.9 million, representing a 14% y-o-y decline. The business was affected by the challenging market along with lower residential listing volumes and new project commencements. National listings decrease by 15% during the period, which includes listing declines of 22% across Sydney and 21% in Melbourne. The business posted a 2% reduction in total operating expense for the quarter on account of robust cost management and proficiencies grew from an organisational realignment.


Q1FY20 Financial Highlights (Source: Company Reports)

Outlook: As per the Management, listings for the H1FY20 are expected to be lower on pcp terms, primarily due to the relatively positive listings environment in H1FY19 across the Melbourne and Sydney markets. Hence, the company expects a skewed revenue growth in H2FY20.

Stock Recommendation:The stock of REA is trading at $112.310 with a market capitalization of $15.03 billion. The stock made a 52-week low and high of $71.54 to $116.50 and currently, the stock is trading at the upper band of its 52-week trading range. The stock has delivered positive returns of 5.07% and 16.2% in the last three months and six months, respectively. The business has invested across several innovation and growth schemes. Considering the above factors with improved business prospects, we give a “Hold” rating on the stock at the closed price of $112.310, down 1.569% as on 03 February 2020.
 

Link Administration Holdings Limited

Posted Robust NPAT Growth at 123% on y-o-y basis: Link Administration Holdings Limited (ASX: LNK) is primarily involved in the administration of financial ownership data. Recently, the company reported its acquisition of Pepper Group’s European Loan Servicing, Advisory and Asset Management Business.

FY19 Operational Highlights: For the period ending 30 June 2019 or FY19, the company reported revenue of $1,403 million, depicting an increase of 17% on y-o-y basis. The company posted recurring revenue of $1,123 million, up 18% on pcp terms. Last year, the company went through a challenging operating environment, with a large volume of regulatory change and an unsettled political landscape in the UK. Operating EBITDA came in at $356 million, up 6% on y-o-y basis. Operating NPATA came in at $202 million, down 3% on pcp terms. Net Operating Cash Flow, during the period came in at $339 million, up 6% on pcp terms. Statutory was recorded at NPAT $320 million, grew 123% from FY18.


FY19 Operational Highlights (Source: Company Reports)

Outlook: As per the FY20 outlook, the company expects revenues within the range of $480 million to $500 million while operating EBITDA is expected within the range of $60 million to $70 million. The company expects to deliver $50 million of annualised savings by end of FY22 from global transformation.

Valuation Methodology: Price to Earnings Multiple Approach
 
Price to Earnings value Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation:The stock of LNK is quoting at $6.46 with a market capitalization of $3.61 billion. The stock made a 52-week low and high of $4.50 to $7.9 and currently, the stock is trading towards the upper band of its 52-week trading range. The stock has delivered stellar returns of 21.61% and 33.79% in the last three months and six months, respectively. Considering the above factors, we have valued the stock using a price to earnings-based relative valuation method. For the purpose, we have taken peers likeComputershare Ltd (ASX: CPU), ASX Ltd (ASX: ASX) and Medibank Private Ltd (ASX: MPL) and arrived at a target price with lower single-digit upside (in % terms).  Hence, we give a “Hold” rating on the stock at the closed price of $6.46, down 5.14% as on 03 February 2020.
 

Nanosonics Limited

PBT Grew by 201% on y-o-y Basis: Nanosonics Limited (ASX: NAN) is engaged in the research, development, and marketing of innovative technologies in infection control and decontamination. Recently, the company confirmed the appointment of Dr. Lisa McIntyre as a Non-executive Director, effective from 13 December 2019.

FY19 Operational Highlights: For the period ended 30 June 2019, the company reported sales of $84.3 million, up 39% on y-o-y basis.Over the period, the business witnessed strong global installed base growth, with installed base currently at 20,930 units, up 18% on y-o-y basis. Capital sales stood at $32.8 million, demonstrating a growth of 29% on y-o-y basis while the sales from consumables and service segment stood at $51.5 million, up 47% on y-o-y basis. During the year, the company successfully launched its Trophon® 2 in North America, Europe and Australia. Operating profit before tax came in at $16.8 million, up 201% from FY18. The company reported a profit after income tax of $13.6 million as compared to $5.8 million in FY18. The company posted an operating expense of $49.2 million, which includes $11.4 million for research and development which was primarily used in new product innovations.



FY19 Income Statement Highlights (Source: Company Reports)

Valuation Methodology: Price to Book based Valuation

Price to Book Value based Valuation(Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation:The stock of NAN is trading at $6.850 with a market capitalization of $2.09 billion. The stock has a 52-week low and high of $3.190 and $7.60 and currently, the stock is trading towards the upper band of its 52-week trading range. The stock has delivered stellar returns of 25.95% and 107.78% in the last six months and one year, respectively. The company has delivered excellent growth within the core trophon business while making significant investments towards the long-term strategy of establishing Nanosonics as a globally recognised leader in infection prevention. Considering the above factors, we have valued the stock using a price to book based relative valuation method. For the purpose, we have taken peers like Pro Medicus Ltd (ASX: PME), Mayne Pharma Group Ltd (ASX: MYX), Volpara Health Technologies Ltd (ASX: VHT) and arrived at a target price with lower single-digit downside (in % terms).  Hence, we have a watch stance on the stock at the closed price of $6.85, down 1.297% as on 03 February 2020.

Tyro Payments Limited

Reported Decent Growth in Gross Profit: Tyro Payments Limited (ASX: TYR) is payments solution company which operates in payments, banking and other corporate segments. Recently, the company was informed by the Department of Human Services (DHS) that its tender for the provision of Medicare Easyclaim Claiming Services has been identified as successful.

FY19 Operational Highlights: For the Period ended 30 June 2019, the company reportedrevenue of $189.77 million, as compared to $148.23 million in previous financial year. The company reported gross profit at $83.260 million, as compared to $ $69.068 million in FY18. Loss for the year came in at $18.439 million, as compared to $17.146 million in previous corresponding period. The company reported total operating expenses at $103.523 million, as compared to $87.365 million in FY18. The company reported cash and cash equivalents of $23.9 million, property, plant and equipment of $18.734 million and total assets of $148.664 million as on 30 June 2019. 


FY19 Income Statement Highlights (Source: Company Reports)

Stock Recommendation:The stock of NAN is trading at $3.860 with a market capitalization of $1.91 billion. The stock made a 52-week low and high of $3.220 and $3.920 and currently, the stock is trading towards the upper band of its 52-week trading range. The business witnessed decent growth in its top-line and reported higher gross profit during FY19. The stock has delivered stellar return of 9.09% in the last one month. Considering the recent price movement and business prospect, we recommend a “Speculative Buy” rating on the stock at the closed price of $3.860, up 0.521% as on 03 February 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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